Royal Unibrew A/S Annual Report 2014 2 ANNUAL REPORT 2014 Royal Unibrew

Content

Management’s REVIEW Royal Unibrew in brief 3 The Hartwall integration contributes towards significant earnings and cash flow boost 4 Financial Highlights and Ratios 7 Strategy 9 Outlook 12 Financial Review 14 Western Europe 18 Baltic Sea 22 (formerly North East Europe, activities included unchanged) Malt Beverages and Exports 26 (formerly Malt Beverages, activities included unchanged) Shareholder Information 29 Corporate Governance 33 Risk Management 36 Remuneration 40 Board of Directors and Executive Board 42 Organisation and Employees 47 Corporate Social Responsibility 49

MANAGEMENT’S STATEMENT AND AUDITOR’S REPORT Management’s Statement on the Annual Report 54 Independent Auditor’s Report 55

Consolidated FINANCIAL STATEMENTS Income Statement 57 Statement of Comprehensive Income 57 Balance Sheet 58 Cash Flow Statement 59 Statement of Changes in Equity 60 Contents of Notes 61 Notes 62 parent company fiNANCIAL STATEMENTS Contents 97 Income Statement 98 Statement of Comprehensive Income 98 Balance Sheet 99 Cash Flow Statement 100 Statement of Changes in Equity 101 Notes 102

OTHER INFORMATION Quarterly Financial Highlights and Ratios 116 Definitions of Financial Highlights 117 Group Structure 118

Frontpage photo: Photographer Henrik Damgaard

The Annual Report has been prepared in Danish and English. In case of discrepancy the Danish version shall prevail. ANNUAL REPORT 2014 Royal Unibrew 3

Royal Unibrew in brief

Net revenue in 2014 EBITDA in 2014 EBIT margin in 2014 1.1 percen- 35% higher than in 2013 54% higher than in 2013 tage points higher than in 2013 mDKK mDKK % 6,056 1,130 13.6%

NET PROFIT FOR THE YEAR 2014 Net Revenue in 2014 EBIT in 2014 30% HIGHER THAN IN 2013 allocated by segment allocated by segment* mDKK % Malt % Malt Beverages 7% Western Europe 44% Beverages 10% Western Europe 59%

624 Baltic Baltic Sea 49% Sea 36%

*-5% not allocated

Net interest-bearing debt Cash Flow per share Earnings per share (EPS) mDKK mDKK mDKK 2379 81,1

1553 62,4 56,5 44,4 44,2 45,9 36,4 35,6 770 31,8 631 25,1 321

2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014

Royal Unibrew Royal Unibrew is a leading regional player in a number of markets in primarily Northern Europe, produces, markets, Italy and in the international malt beverage markets. Our main markets comprise Denmark, sells and distributes ­Finland, Italy and Germany as well as Latvia, Lithuania and Estonia. The international malt beverage quality beverages. markets comprise a number of established markets in the Americas region and major cities in We focus on branded Europe and North America with high concentration of inhabitants from the Caribbean and African products within beer, areas in which malt beverages are popular as well as emerging markets in for example Africa. malt beverages and • In Denmark we are the second largest multi-beverage business with a number of strong brands. soft drinks (energy • In Finland we are the second largest multi-beverage business with a number of strong brands, drinks, mineral water as well as international spirits and wine brands. and fruit juices) as • In the Baltic countries were are among the leading multi-beverage businesses holding consider- well as cider and able market positions. long drinks (RTD). • In Italy we are among the market leaders in the super premium segment for beer with Ceres Strong Ale. • In the international malt beverage markets we are among the market leaders in the premium segment, whereas the beer segment is covered by the Faxe brand. 4 ANNUAL REPORT 2014 Royal Unibrew

The Hartwall integration contributes towards significant earnings and cash flow boost

”2014 was a satisfactory year for Royal Unibrew. Earnings and cash flow were the best ever. The Hartwall acquisition has progressed postively, and we have made considerable headway with our change plan and thus the integration into Royal Unibrew. The significant earnings and cash flow boost is largely attributable to the Hartwall acquisition, while also the rest of our business saw good momentum and continues to deliver strong results. This has made us increase our medium-term EBIT margin target from 13% to 14%. The strong cash flow contributed towards a significant debt reduction, and our distribution programme will be resumed with a considerable share buy-back programme and a dividend distribution recommendation from the Board of Directors to the AGM.”

I am pleased with the good results that rope, but we also operate outside Europe Acquisitions are part of our strategy, and we achieved in 2014. We adjusted our through our considerable export of non- we will closely monitor and consider any earnings outlook significantly upwards alcoholic malt beverages and Faxe beer. acquisition opportunities that may gen- in August 2014 due to the good sum- Our strategy in Europe builds on strong erate added value for our shareholders. mer weather in Northern Europe, faster regional brand portfolios – preferably However, over the past 25 years Europe efficiency improvement of Hartwall than supplemented by international brands has seen considerable industry concen- originally expected and a slower loss of through strategic bottling agreements. It tration, and therefore the probability of market share in Denmark than expected. is also fundamental to our strategy that attractive platform acquisitions is not we are a beverage provider rather than high. Our priorities during the year were as merely a brewery. That makes us less planned and reflect our focus on strate- vulnerable to the general structural de- Leadership supports gy, execution and supporting leadership. cline in the European beer market while strategy realisation enabling us to benefit from the health Our management values play an impor- The results also reflect our continued trend and the trend towards functional tant part in our strategy realisation. We focus on maintaining and further devel- beverages characterising other parts of cannot compete with the ”deep pockets” oping market and segment positions, the market. The strategy enhances our of global players; as a minor player, we products and brands, strengthening our relevance to our customers and ensures must therefore capitalise on the com- partnerships as well as achieving high efficient utilisation of our entire infra- parative advantages of our leadership. efficiency throughout our business. The structure. good results were achieved in spite of Both strategic understanding and op- challenging market conditions in Europe When we are operating in the main- erational excellence are key parts of our with general consumer restraint. stream segment, the generally flat to management DNA and we constantly negative market development implies a strive to put consumers and customers Our strategy of regional constant need for commercial flexibility first through our insight and our contin- beverage player and innovation to reinforce market posi- ued focus on value creation shared with Royal Unibrew is a regional player in a tions and for continuous improvements our customers. very consolidated industry with global across our business. competitors. Our main focus area is Eu- ANNUAL REPORT 2014 Royal Unibrew 5

We also strive to be a business and a Due to the competitive environment in We are sticking to our ambitious plan for partner with an open, flexible, holistic the past year, the credit markets have to enhancing the efficiency across Hartwall, and innovative approach that, combined a minor extent eased their requirements and are pleased to note that we are with a non-bureaucratic mindset, leads in respect of loan covenants. We have, ahead of schedule. to fast decisions. however, chosen to maintain our capital structure targets, not least in light of our Hartwall has been losing market shares Our success is based on a strong local un- continued wish to keep our financial, for several years, particularly within beer. derstanding and rooting when it comes strategic and competitive strength – a Our commercial agenda is, indeed, about to both brands and our cooperation with factor which enabled us to act on the reinforcing Hartwall’s position in Finland customers. Our local leaders are strong opportunity when Hartwall was put up through partnerships with our custom- leaders who take responsibility for opti- for sale. ers, through our presence in the off-trade mising the needs of our local consumers channel and in the on-trade channel and and customers, regardless of the origins During 2014 we increased our medium- through strengthening our many well- of the brand. term EBIT margin from 13% to 14%. The known brands. This is a process which is target of 14% remains ambitious – also expected to take at least another couple Due to the challenging market condi- when comparing our results to those of of years and which will require consider- tions, the seasonal fluctuations and the international and regional multi-bever- able investments in our brands. intense competition from global players, age companies in Europe where more we also make an effort to manage Royal than 90% of our activities are carried Strong market positions in a Unibrew with agility and flexibility and out. Our target is ambitious too in light challenging European market to constantly review our plans in light of of the weak outlook for the development 2014 was a challenging year for the Eu- current developments. That makes our in European consumer spending as well ropean beverage industry with a general overall management of Royal Unibrew as our ambition to continue investing in market decline driven by changed and stronger. our growing malt business and a rein- more polarised consumption habits, by forcement of Hartwall’s position. consumer restraint and by fiscal meas- In my opinion, a considerable part of the ures and excise increases. However, in explanation of our positive momentum The comprehensive strategic change of Northern Europe the decline was partly in recent years lies in the shared man- Royal Unibrew in recent years has re- offset by extraordinarily good summer agement values within Royal Unibrew, flected on the share price, market value weather. and in the continuity seen among our and liquidity of the Royal Unibrew share. employees. Most recently this has resulted in Royal In spite of recession in Finland and Unibrew now being included in the Large Italy, the expected loss of a private label Financial targets Cap index on NASDAQ OMX Copenhagen agreement in Denmark and an expected Our targets for indebtedness and capital A/S. To strengthen the liquidity of the market share decline in Denmark, we structure on the one hand and distribu- Royal Unibrew share and to increase managed to maintain unchanged rev- tion policy on the other have remained its accessibility to private investors, the enue with a slightly positive price mix. unchanged for several years. Board of Directors will now propose to We have generally reinforced our market the AGM to decide upon a share split. positions in Royal Unibrew in recent However, with the acquisition of Hart- years, while maintaining our market wall in August 2013 we decided tem- Hartwall integration share in Finland in 2014 following several porarily to increase our indebtedness progressing as planned years of losses, which is satisfactory. beyond the targeted framework while Hartwall holds a strong number 2 posi- putting our distribution policy on hold tion in the Finnish beverage market – a This is the result of considerable invest- until 2015. We wanted to reduce our debt position that we want to reinforce. Dur- ments in our commercial activities, in fast in order to resume dividend distribu- ing 2014 we introduced major changes innovation and in our brand portfolios. tion – albeit from a considerably higher to Hartwall’s management and organi- earnings base. sation, thus bringing into play highly We are very pleased to note our very high qualified existing and new competences score also in 2014 in third-party meas- Based on the considerable cash flow gen- to strengthen our focus on consumers urements of our customers’ satisfaction eration and the debt reduction following and customers, while making Hartwall with their consumer goods supplier. the Hartwall acquisition, a new consider- even more flexible and agile. Although able share buy-back programme will now our goal is clear, we recognise that it will We will continue to work consistently be launched, and the Board of Directors take another couple of years for an or- and determinedly, but also with a hum- will recommend to the AGM the distribu- ganisational transformation on this scale ble approach, towards being our custom- tion of dividend for financial year 2014. to become firmly established. ers’ preferred business partner. 6 ANNUAL REPORT 2014 Royal Unibrew

Strong growth in Malt Beverages considerable sales and marketing invest- tinue our focus on integrating Hartwall and Exports ments in close cooperation with our local into the Royal Unibrew Group. Our non-European markets for malt partners. It is also satisfactory to note beverages and beers were affected by that, at the same time, we have succeed- I take this opportunity to thank sincerely the global growth pause and by local ed in generating considerable Faxe beer everyone at Royal Unibrew for their great exchange rate deteriorations in 2014. exports in our malt beverage markets as effort in a very busy year. Slightly out well as in other markets. of the ordinary, I would like to express In spite of this and in spite of consider- my special thanks to our many Hartwall able extraordinary inventory build-ups in Since 2013 we have increased our invest- employees for contributing positively to 2013 in connection with the opening of ment in establishing local organisations the many and considerable changes that a number of new markets, we achieved and in sales and marketing. We intend we have gone through together. satisfactory growth that meets our to continue increasing our investments medium-term target of average annual as long as we identify attractive growth Our employees have, through great revenue growth of 10-15% and an average opportunities. market and customer insight, commit- EBIT margin of about 20%. ment and energy as well as persistency, Outlook for 2015 created strong results of which we can Our strong point in this part of our We expect 2015 to be a year marked by all be proud. I also take the opportunity business is our long and considerable continued consumer restraint in Europe, to thank profoundly our customers for experience of the international malt especially in Finland and Italy; at the another year of good partnership and, beverage markets, our strong malt bever- same time, structural declines may be finally, our shareholders for supporting age portfolio with Vitamalt, Supermalt expected in certain segments of the our plans in 2014. and Powermalt and within beer the Faxe beverage market. Moreover, we are ex- brands as well as our strong distributor periencing increased competition among partnerships. both retailers and beverage providers. Henrik Brandt President and CEO Establishing and developing our strong We will therefore also in 2015 need to malt beverage brands in new markets manage Royal Unibrew with flexibility require efforts over several years with and great adaptability, and we will con- ANNUAL REPORT 2014 Royal Unibrew 7

Financial Highlights and Ratios

2014 2013 2012 2011 2010

Sales (million hectolitres) 9.0 7.0 5.4 5.7 6.6

Income Statement (mDKK) Net revenue 6,056 4,481 3,430 3,431 3,775 EBITDA 1,130 732 611 601 601 Earnings before interest and tax (EBIT) 826 560 485 474 417 EBIT margin (%) 13.6 12.5 14.1 13.8 11.0 Income after tax from investments in associates 35 34 34 14 31 Other financial income and expenses, net -60 -46 -38 -27 -73 Profit/loss before tax 801 548 481 461 375 Net profit/loss for the year 624 480 373 351 278 Parent Company shareholders’ share of profit/loss 624 480 371 348 278

Balance Sheet (mDKK) Non-current assets 5,664 5,810 1,992 2,291 2,375 Total assets 7,024 6,925 2,848 2,890 3,057 Equity 2,818 2,133 1,348 1,321 1,281 Net interest-bearing debt 1,553 2,379 321 631 770 Net working capital -814 -834 -179 -149 -134

Cash Flow (mDKK) Operating activities 895 653 497 398 492 Investing activities -69 -2,837 192 3 160 Free cash flow 824 598 476 384 463

Share ratios (DKK) Earnings per share (EPS) 56.5 45.9 35.6 31.8 25.1 Diluted earnings per share 56.2 45.8 35.6 31.8 25.1 Cash flow per share 81.1 62.4 44.2 36.4 44.4 Diluted cash flow per share 80.7 62.2 44.2 36.4 44.4 Dividend per share 34.0 0.0 24.0 17.0 12.5 Year-end price per share 1,087.0 736.0 492.0 321.5 332.0

Employees Average number of employees 2,374 1,935 1,635 1,785 2,210

Financial ratios (%) Return on invested capital incl. goodwill (ROIC) 13 13 21 18 14 Return on invested capital excl. goodwill (ROIC) 19 18 24 22 16 Free cash flow as a percentage of net revenue 14 13 14 11 12 Cash conversion 132 125 128 110 167 Net interest-bearing debt/EBITDA 1.4 2,3* 0.5 1.0 1.3 Equity ratio 40 31 47 46 42 Return on equity (ROE) 25 28 28 27 24 Dividend payout ratio (DPR) 60 0 68 55 50 * calculated proforma with Hartwall’s realised full-year EBITDA

Ratios comprised by the “Recommendations and Financial Ratios 2010” issued by the Danish Society of Financial Analysts have been calculated according to the recommendations. Definitions of financial highlights and ratios are provided on page 117.

ANNUAL REPORT 2014 Royal Unibrew 9

Strategy

Royal Unibrew’s overall strategy Royal Unibrew views developments in macroeconomy is challenged, which and medium-term financial the individual markets as follows: will affect total beverage consumption targets remain unchanged negatively in the coming years. On-trade is expected to be more affected by the after being updated in August WESTERN EUROPE negative development than off-trade. 2014, when the EBIT margin Innovation will continue to be an impor- target was increased to about The Danish consumer market is expected tant element in developing the overall continuously to be affected by a minor beverage market. 14%. The capital structure and structural consumption decline in the dividend targets also remain coming years. The beer category will be The total beverage market in the Baltic unchanged. the primary driver of the structural de- countries is expected structurally to have cline resulting from consumers increas- a larger overall potential in the long term ing their consumption of other alcoholic than today. The potential will be closely beverages. Within the classic soft drinks related to the macroeconomic conditions and mineral water categories new – improvement of the spending power, a OVERALL STRATEGY product sub-categories are still expected reduction of unemployment and a stop to be developed driven by, among other to emigration. It is Royal Unibrew’s strategy to be a things, health trends and the need for focused, strong regional brewer within functional beverages, which is expected beer, malt and soft drinks, including to curb the decline in the total beverage mineral water and fruit juices as well market. MALT BEVERAGES AND EXPORTS as cider and long drinks (RTD) holding leading positions in the markets or the The Italian beer market has a low per The market for dark malt beverages is segments in which we operate. capita consumption since, historically, geographically fragmented, and con- consumers have had a preference for sumer preference for dark malt bever- Our medium-term financial targets were wine products. Structurally, the beer ages is rooted in tradition. The markets updated in August 2014 in connection market is expected to show a slight in- for dark malt beverages in established with the presentation of the H1 Report. crease; however, in the near future it will economies in Europe and the Caribbean The medium-term financial target is to be affected by the economic challenges are expected to be structurally stable, achieve an EBIT margin of 14% (changed faced by Italy and Italian consumers. The whereas the markets in a number of from 13%). The target is ambitious in a financial challenges in Italy are expected developing and growth economies in European industry context and in light to affect the super premium segment eg Africa are generally showing growth, of the expected economic situation in negatively due to, among other things, driven primarily by population growth. In Europe in future years as well as the consumption pattern changes shifting the selective markets cultivated by Royal planned investments in creating long- sales from on-trade to off-trade. Unibrew, including particularly markets term organic growth, including particu- in a number of developing countries, larly in the segment for Malt Beverages the beer market is expected generally to and Exports. BALTIC SEA show growth. The Malt Beverages and Exports segment is expected in the me- Royal Unibrew operates in markets that In Finland the total beverage market dium term (measured at unchanged ex- are characterised by different dynamics. in which Hartwall operates is expected change rates) to show an average annual This has been taken into account when to show a slight structural decline in revenue growth of 10-15%, whereas, with determining the strategy market by the coming years, due to, among other the existing market mix, EBIT margin is market. things, the high excise level. The Finnish expected to be at the level of 20%. 10 ANNUAL REPORT 2014 Royal Unibrew

Main elements of the overall strategy

Focus on markets and segments in which Royal Uni- Focus on innovation and development of Royal brew holds or may achieve a considerable position. Unibrew’s products and local brand positions. Royal Unibrew will focus on further developing established market Royal Unibrew’s strong position as a regional brewer builds on strong and segment positions where the Company holds either a leading local market positions established on the basis of well-known local position, such as in Denmark or the Baltic countries, or considerable brand portfolios subject to continuous further development. The and leading niche positions, such as in Italy or in the international product portfolio development includes the Group’s own develop- malt beverage markets. Mainstream market positions in consolidated ment of new taste varieties, products and brands for existing and markets must lead to, or hold prospects of leading to, a role as a lead- new beverage categories as well as the conclusion of new licence ing player to create attractive profitability. agreements both as a licensee and a licensor. For example, Royal Unibrew benefits from a long-standing cooperation with Pepsico and Royal Unibrew’s natural market area is characterised by considerable Heineken as a licensee in Denmark and Finland as well as the Baltic industry concentration. To the extent that structural growth op- countries (only Heineken) – cooperation through which the local portunities might reinforce existing market positions or create new brand portfolios are expanded with well-known international brands. market positions, these will be assessed provided that there is a clear strategic match and that long-term shareholder value can be created. Focus on operational efficiency. Royal Unibrew will continue its focus on pursuing all opportu- Mainstream market positions in smaller markets may often be reinforced through focus on a broader beverage portfolio to leverage nities of enhancing the efficiency of all links in the Company’s customer relations and the entire infrastructure. value chain.

Focus on maintaining Royal Unibrew’s financial flexibility, competitive power and scope for strategic action through an appropriate capital structure.

Financial targets and capital structure

In 2014 cash flow and net interest-bearing debt were positively affected, Indebtedness extraordinarily, by the sale of parts of the brewery site in Aarhus. In the It remains Royal Unibrew’s objective to maintain its indebtedness at a coming years cash flow are expected to be further positively affected, level which, on the one hand, satisfies the request for flexibility with extraordinarily, by the sale of the remaining part of the brewery site in respect to acting on business opportunities and maintaining independ- Aarhus. ence in relation to the Group’s bankers, and, on the other hand, ensures that Royal Unibrew is not heavily overcapitalised. The starting point for Royal Unibrew’s further development and achievement of the financial targets is generally characterised by busi- It remains Royal Unibrew’s target that net interest-bearing debt should ness development through continued focus on growth opportunities, not exceed 2.5 times EBITDA and that an equity ratio of at least 30% innovation, sales and marketing, and by continuous efforts to improve, should be maintained at year end. optimise and enhance the efficiency of Royal Unibrew. Royal Unibrew’s annual investments are now expected to be at the EBIT margin level of about 4% of net revenue compared to the interval since 2009 The medium-term EBIT margin target remains about 14%. of 4-6%.

Distribution policy

As Royal Unibrew is still expected to generate a rather significant considered appropriate to optimise the Company’s capital structure. It liquidity surplus going forward, it remains the intention currently to is the intention that shares bought back will be cancelled. In addition make distributions to shareholders through a combination of annual to adjusting the Company’s capital structure, share buy-backs are also dividend and share buy-backs taking into account the mentioned expected to increase the liquidity of the Royal Unibrew share, due to targets for equity ratio and indebtedness, annual earnings and cash the high free float, to the benefit of all shareholders. flow as well as Royal Unibrew’s strategic position in general.

It is Royal Unibrew’s intention to distribute dividend of 40-60% of net profit for the year and to launch share buy-back programmes if it is

12 ANNUAL REPORT 2014 Royal Unibrew

Outlook

The outlook for Royal Unibrew’s financial development in 2015 customer partnerships. At the same has been prepared taking into account a number of circumstances, time, our broad beverage portfolio sup- including how the Company’s markets are expected to be affected ports the possibilities of high opera- tional efficiency at all organisational by general economic activity, fiscal measures and consumer levels. Our continuous improvement uncertainty. Moreover, the outlook has been prepared taking into work will continue relentlessly at all account the development in material expense categories as well as organisational levels, including through investment-driven initiatives, which will the effect of initiatives completed and initiated. contribute positively to improvements. Generally, Royal Unibrew’s market shares on branded products are expected to be maintained or increased for the key brands.

OUTLOOK FOR 2015 In Finland Hartwall’s product range contains a full beverage portfolio holding Pro forma an overall number two position. For a Outlook Actual actual Actual number of years until 2013, Hartwall was DKK million 2015 2014 2013* 2013 losing market shares, while its position Net revenue (mDKK) 5,900-6,100 6,056 6,050 4,481 remained unchanged in 2014. To ensure Hartwall’s continued position as a mar- EBITDA (mDKK) 1,100-1,200 1,200 1,015 732 ket-leading beverage business in Finland, EBIT (mDKK) 790-890 826 730 560 our main priorities in 2015 will remain * Pro forma actual 2013 has been calculated with Hartwall’s realised revenue and results for the full year concentrated, without any change, on before deduction of transaction costs. commercial focus, organisational devel- The Board of Directors has decided to initiate as soon as possible a share buy-back pro- opment and efficiency improvement. The gramme of up to DKK 350 million in the period to 1 March 2016. The Board of Directors Finnish market has been characterised will recommend to the AGM in 2015 the distribution of dividend of DKK 34 per share. by declining consumption throughout a number of years due to, among other To ensure liquidity of Royal Unibrew’s shares listed on NASDAQ OMX Copenhagen A/S things, increasing excises. This develop- and to align the price level per share with market practice, the Board of Directors will ment is expected to continue in 2015, recommend that the AGM resolve to implement a one to five share split. A change while developments will be affected by of the share denomination from DKK 10 to DKK 2 is proposed. The change of share the exceptionally good summer in 2014. denomination is expected to take effect as of mid-June 2015. In the Danish consumer market Royal Unibrew holds an overall number two market position approaching the market with a broad beverage portfolio. Danish ASSUMPTIONS ABOUT MARKETS al decline in the total market; therefore, consumption is expected to see a slight AND MAIN PRIORITIES FOR 2015 innovation and value management are decline, partly due to a structural market essential to creating relative growth – decline and partly due to the expectation Several of the markets in which Royal and are key parameters in maintaining of a normal summer. Royal Unibrew’s Unibrew offers a broad beverage portfo- and developing Royal Unibrew’s market market share continued in 2014 to be lio are generally seeing a minor structur- positions and in further strengthening positively affected by the extraordinary ANNUAL REPORT 2014 Royal Unibrew 13

situation, which occurred in off-trade In Italy, where Royal Unibrew holds a of years. Great emphasis is placed on sector in 2013. This is expected to affect strong position in the super premium selecting and retaining our cooperation the development from 2014 to 2015 segment with Ceres Strong Ale, the through customer- and consumer-orient- negatively. market is expected to show a low single- ed marketing investments with a view digit percentage decline due to nega- to establishing and reinforcing brand In the Baltic countries Royal Unibrew tive economic growth, low consumer positions. The malt beverages markets in has a broad brand portfolio, primarily confidence, high youth unemployment Europe and the Caribbean are expected within beer, fruit juices, soft drinks and as well as fiscal measures and excise to remain unchanged. The malt beverage mineral water. The development and increases realised and expected. We markets in Africa and Central America continued strengthening of the beverage plan to intensify our cooperation with are expected to show moderate increas- portfolio are necessary to create a basis the many wholesalers and cash & carry es driven by population growth, while a for growth, including strenghtening of customers, and our cooperation with number of these markets are expected customer partnerships. Consumption in off-trade customers will be supported by to be negatively affected by macroeco- the Baltic market is expected to remain consumer activation. nomic developments and local currency stable; however, as regards market and developments in 2015. Also beer exports product mix, the beer market is expected In the Malt Beverages and Exports seg- are expected to increase due to expected to show a slight decline, whereas the ment we focus on a stronger presence in positive developments in both market market for non-alcoholic beverages is already established markets and in the position and the underlying market. expected to be stable/slightly increasing. markets penetrated in the past couple

FINANCIAL ASSUMPTIONS

• Unchanged to slightly declining net selling prices are assumed. • Exchange rates between DKK and other currencies are expected to remain unchanged as compared to the end of February 2015. • A normal summer is assumed (2014 was significantly affected by an exceptionally good summer). • Gross investments are expected to amount to DKK 230-250 million.

• Costs are expected to decrease in 2015 as compared to 2014 • Tax is expected to amount to 22-23% of profit before tax excluding when non-recurring costs were incurred in Q1 for restructuring of income after tax from investments in associates. Hartwall. The full-year effect of efficiency-enhancing measures is expected to reduce costs most significantly in Q1 due to the • A cash flow after tax of DKK 70 million is expected from additional restructuring of Hartwall at the end of Q1 2014. Increased invest- sales of the brewery site in Aarhus in 2015. ments in primarily sales and marketing are, on the other hand, expected to increase costs. • Dividend distribution of DKK 377 million is expected, and a share buy-back programme totalling DKK 350 million has been decided • Given the exchange rate at the end of February 2015, the prices of launched over the next 12 months. the key raw materials categories are expected basically to remain unchanged in 2015. Royal Unibrew has entered into hedging agree- ments for the majority of key consumption categories in 2015. The development comprises geographic as well as product-related dif- ferences, with some categories being expected to increase whereas others are expected to decline.

FORWARD-LOOKING STATEMENTS

This Announcement contains “forward-looking statements”. Undue reliance should not be placed on forward-looking statements because they relate to and depend on circumstances that may or may not occur in the future and actual results may differ materially from those in forward- looking statements. Forward-looking statements include, without limitation, statements regarding our business, financial circumstances, strategy, results of operations, financing and other plans, objectives, assumptions, expectations, prospects, beliefs and other future events and prospects. We undertake no obligation, and do not intend to publicly update or revise any of these forward-looking statements, unless prescribed by law or by stock exchange regulations. 14 ANNUAL REPORT 2014 Royal Unibrew

Financial Review

Due to the extraordinarily good summer weather, a faster Earnings before interest and tax (EBIT) effect of the efficiency-enhancing activities in Finland and a amounted to DKK 826 million, which is strengthened market position in Denmark/Germany, significantly DKK 266 million above the 2013 figure. Measured on a pro forma basis, EBIT better results than in 2013 were achieved in spite of continued went up by DKK 111 million. The profit challenging market conditions in 2014. The acquisition of the before tax amounting to DKK 801 mil- Finnish Hartwall brewery is a key reason for this development; lion for 2014 was DKK 253 million above the 2013 figure. Free cash flow for 2014 however, results in the rest of Royal Unibrew also showed amounted to DKK 824 million compared considerable improvement on 2013. to DKK 598 million in 2013. Net interest- bearing debt was reduced by DKK 826 million in 2014 and amounted to DKK 1,553 million at year-end. The debt multi- ple, NIBD/EBITDA, decreased from 2.3 to BUSINESS DEVELOPMENT in the Malt Beverages and Exports seg- 1.4 in 2014. ment, in which sales increased by 9% Overall, Royal Unibrew maintained its and net revenue by 7% on 2013 despite In 2014, 30,375 square metres of build- market shares in 2014. Sales and net negative macroeconomic developments ing rights at the brewery site in Aarhus revenue showed increases of 28% and in several markets. were sold. In total, 85,475 square metres 35%, respectively, for 2014. Measured on of the total 140,000 square metres of a pro forma basis (including Hartwall in In 2014 Royal Unibrew improved its earn- building rights have now been sold 2013) and organically (excluding Hartwall ings considerably as compared to last and acquisition of an additional 18,900 for the period of 2014 in which Hartwall year. The higher earnings are due to the square metres has been requested, cor- was not included in 2013), sales and net full-year effect of the Hartwall acquisi- responding to 75%. The sale of building revenue were at the 2013 level in spite of tion, the extraordinarily good summer rights has affected cash flow and net Finland and Italy being in recession with weather in Northern Europe, enhanced interest-bearing debt positively by ap- a negative consumption trend, which efficiency at Hartwall and a changed prox DKK 100 million in 2014, whereas is not expected to change in the short product mix in the Danish consumer results and equity were not affected by term. The highest growth was achieved market. the sale, which was effected at revalued amount.

EBITDA current 12-month development (mDKK) (%) (mDKK)

1200 16 7000 1000 12 6000 800 600 8 5000 400 4 4000 200 EBIT margin 0 0 3000 Net revenue 2010 2011 2012 2013 2014 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 ANNUAL REPORT 2014 Royal Unibrew 15

The net revenue, EBITDA and EBIT realised were in line with the outlook in March and August:

Realised Outlook Outlook DKK million in 2014 August 2014 march 2014

Net revenue 6,056 5,950-6,050 5,750-6,050 EBITDA 1,130 1,090-1,140 965-1,015 EBIT 826 790-840 665-715

INCOME STATEMENT channel mix within the individual seg- ure and amounted to DKK 1,987 million. ments. Net revenue for Q4 2014 was 5% Measured on a pro forma basis, sales Beer and soft drinks consumption in below the figure for the corresponding and distribution expenses were DKK 110 Royal Unibrew’s markets with broad bev- period of 2013. million lower. Sales and distribution erage portfolios and in Italy continues to expenses per volume unit were 5% lower. be affected by consumer restraint. Due to Gross profit for 2014 was DKK 865 million The restructuring of Hartwall in 2013 the extraordinarily good summer in Den- above the 2013 figure and amounted and the efficiency-enhancing activities mark/Germany and the Baltic countries, to DKK 3,150 million. Gross profit was in 2014 affected developments positively. the markets generally showed increases, positively affected by higher efficiency, Restructuring costs amounted to DKK 21 whereas the Finnish market developed whereas restructuring costs of DKK 17 million for 2014, whereas they amounted negatively in spite of the extraordinarily million in Finland had a negative effect. to DKK 18 million for 2013. good summer. Measured on a pro forma basis, gross profit showed a DKK 47 million decrease Administrative expenses for 2014 were Sales for 2014 aggregated 9.0 million on 2013. Gross margin was 1.0 percent- DKK 72 million above the 2013 figure and hectolitres of beer, malt beverages and age point above the 2013 margin and amounted to DKK 336 million. Measured soft drinks, which is 28% above the 2013 amounted to 52.0% compared to 51.0% in on a pro forma basis, administrative figure. Measured on a pro forma basis, 2013. The Finnish business has affected expenses were DKK 36 million below sales were at the 2013 level. Sales for Q4 gross margin positively by 1.0 percent- the 2013 figure, corresponding to a 10% 2014 were 5% below the figure for the age point. Measured on a pro forma decrease. Restructuring costs in Finland corresponding period of 2013. basis, gross margin was 0.8 percent- amounted to DKK 12 million in 2014. age point lower in 2014 than the gross Net revenue for 2014 showed a 35% margin of 52.8% in 2013. The reason for Earnings before interest, tax, deprecia- increase amounting to DKK 6,056 million this is that the average net selling prices tion and amortisation (EBITDA) for 2014 compared to DKK 4,481 million in 2013. per volume unit showed an increase of showed a DKK 398 million increase and Measured on a pro forma basis, net 0.4%, whereas average production costs amounted to DKK 1,130 million compared revenue increased marginally from 2013. including restructuring costs per volume to DKK 732 million in 2013. Measured Average net selling prices per volume unit increased by 2.2%. on a pro forma basis, EBITDA went up unit were 0.4% higher than in 2013, by DKK 130 million from 2013. Thus, the partly due to a changed segment mix Sales and distribution expenses for 2014 lower gross profit was more than offset and partly due to a changed product and were DKK 539 million above the 2013 fig- by the lower expenses and by transac-

NET REVENUE EBIT EBIT margin (mDKK) (mDKK) (%)

7000 900 16 750 6000 12 600 5000 450 8 300 4000 4 150 3000 0 0 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 16 ANNUAL REPORT 2014 Royal Unibrew

Developments in activities for 2014 broken down on market segments

Malt western Baltic Beverages Europe sea* and Exports** Unallocated Group

2014 2013

Sales (thousand hectolitres) 3,630 4,730 614 - 8,974 7,033 Growth (%) -1.4 69.5 9.2 27.6 29.2 Share of sales (%) 40 53 7 - 100 Net revenue (mDKK) 2,674 2,975 407 - 6,056 4,481 Growth (%) 0.9 105.1 6.8 35.1 30.6 Share of net revenue (%) 44 49 7 - 100 EBIT (mDKK) 484 295 84 -37 826 560 EBIT margin (%) 18.1 9.9 20.7 13.6 12.5

*formerly North East Europe ** formerly Malt Beverages

tion costs of DKK 15 million relating Net financials for 2014 showed a net The Parent Company’s profit for the year to the Hartwall acquisition affecting expense of DKK 25 million, which is amounted to DKK 630 million compared EBITDA only in 2013. EBITDA for Q4 2014 DKK 13 million above the 2013 figure. The to DKK 462 million in 2013. Dividend amounted to DKK 198 million, which was increase is primarily due to interest ex- income from subsidiaries and associates DKK 11 million above the figure for the penses being DKK 14 million higher due amounted to DKK 272 million compared to corresponding period of 2013. to the full-year effect of the financing of DKK 153 million in 2013. The brewery site the Hartwall acquisition. Income after in Aarhus was in 2014 written up by Earnings before interest and tax (EBIT) for tax from investments in associates was DKK 70 million. 2014 amounted to DKK 826 million, which DKK 1 million above the 2013 figure. is DKK 266 million above the 2013 figure. Measured on a pro forma basis, EBIT in- Profit before tax for 2014 showed a BALANCE SHEET creased by DKK 111 million. Non-recurring DKK 253 million increase amounting to costs for restructuring in Finland affected DKK 801 million compared to DKK 548 Royal Unibrew’s balance sheet amounted EBIT negatively by DKK 50 million in million in 2013. to DKK 7,024 million at 31 December 2014, 2014 compared to DKK 18 million in 2013, which is DKK 99 million above the figure which was also affected negatively by Tax on the profit for 2014 was an expense at 31 December 2013. Inventories and re- transaction costs of DKK 15 million. EBIT of DKK 176 million, which corresponds to ceivables were at the 2013 level, whereas for Q4 2014 amounted to DKK 114 million a tax rate of 22 on the profit excluding cash at bank and in hand increased by compared to DKK 111 million for the cor- income after tax from investments in just below DKK 250 million. Oppositely, responding period of 2013. ­associates. The reduction of the tax rate non-current assets were reduced by am- in Denmark has reduced the tax rate by ortisation of intangible assets and depre- EBIT margin for 2014 was 13.6% and, as 0.6 percentage point. ciation of property, plant and equipment, expected, higher than in 2013 when it which exceeded net investments in 2014 was 12.5%. Measured on a pro forma Net profit for the year amounted to DKK by DKK 150 million. basis, EBIT margin was 1.8 percentage 624 million, which is a DKK 144 million points above the 2013 margin, which improvement on the net profit of DKK The equity ratio increased by 9 percent- represented 11.8% of net revenue. EBIT 480 million realised in 2013, which was, age points and represented 40% at 31 margin for 2014 was higher in both extraordinarily, positively affected by December 2014 compared to 31% at the the Western Europe and the Baltic Sea DKK 60 million due to the reduction end of 2013. Equity at the end of 2014 segments, whereas, as expected, it of the corporation tax rates in both amounted to DKK 2,818 million compared was lower in the Malt Beverages and ­Denmark and Finland. The reduction to DKK 2,133 million at the end of 2013 Exports segment due to investment in of the corporation tax rate in Denmark and was increased by DKK 685 million, business development. EBIT margin for in 2014 affected results positively by including DKK 672 million attributable to Q4 2014 showed a 0.6 percentage point DKK 5 million. the positive comprehensive income. The increase. comprehensive income comprises the ANNUAL REPORT 2014 Royal Unibrew 17

profit for the period of DKK 624 million, sociates increased by DKK 246 million and to DKK 53 million. It was as expected, revaluation net of tax of the brewery site investments in property, plant and equip- negatively affected by the main part of in Aarhus of DKK 54 million, negative ment were net DKK 20 million higher than tax for the year, including tax on asset exchange rate and other adjustments re- in 2013. Revenues from asset divestments, divestments, being paid in Q4. Addition- lating to foreign group enterprises of DKK substantially relating to the brewery site ally, the planned investments in property, 17 million and a positive development in in Aarhus were DKK 43 million higher and plant and equipment shifted towards the value of hedging instruments (net of investment DKK 63 million higher. The Q4, which also affected free cash flow tax) of DKK 11 million. free cash flow for Q4 2014 amounted negatively in the last quarter of the year.

Net interest-bearing debt for 2014 was reduced by DKK 826 million and amount- ed to DKK 1,553 million at 31 December 2014 compared to DKK 2,379 million at the end of 2013. The development in net interest-bearing debt is above expecta- tions and is related to the free cash flow realised in 2014.

Funds tied up in working capital showed a negative DKK 814 million at the end of 2014 compared to a negative DKK 834 million at the end of 2013. Funds tied up in working capital thus increased by DKK 20 million net, comprising an increase of DKK 34 million with cash flow effect and a reduction of DKK 14 million without cash flow effect relating to value adjustment of hedging instruments. Funds tied up in inventories, trade receivables and trade payables increased by DKK 3 million, whereas the other ele- ments of working capital increased by DKK 17 million. All entities continue their strong focus on managing inventories, trade receivables and trade payables.

CASH FLOW STATEMENT

Cash flow from operating activities showed a DKK 242 million improvement on 2013 amounting to DKK 895 million for 2014 (2013: DKK 653 million). Cash flow comprised the profit for the period adjusted for non-cash operating items of DKK 1,140 million (2013: DKK 735 million), negative working capital cash flow of DKK 34 million (2013: positive DKK 91 mil- lion), net interest paid of DKK 60 million (2013: DKK 55 million) and taxes paid of DKK 151 million (2013: DKK 118 million).

Free cash flow for 2014 increased by DKK 226 million to DKK 824 million compared to DKK 598 million in 2013. Operating cash flow and dividend from as- 18 ANNUAL REPORT 2014 Royal Unibrew

Western Europe ANNUAL REPORT 2014 Royal Unibrew 19

sales NET REVENUE EBIT EBIT margin (thousand hectolitres) (mDKK) (mDKK) (%)

4200 3000 540 20 3500 2500 450 18 2800 2000 360 16 2100 1500 270 14 1400 1000 180 12 700 500 90 10 0 0 0 8 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014

The Western Europe segment comprises Unibrew’s market shares on branded beer Earnings before interest and tax (EBIT) for primarily the markets for beer and soft and soft drinks is estimated from 2013. 2014 showed a DKK 60 million increase drinks in Denmark and Germany as well from DKK 424 million in 2013 to DKK 484 as Italy. Western Europe accounted for Net revenue was 1% above the 2013 million in 2014. The EBIT increase was 44% of the Group’s net revenue for 2014 figure. A shift towards products as well as primarily due to the extraordinarily good and for 59% of EBIT (2013: 59% and 76%, markets and sales channels in Denmark summer and a strengthening of the respectively). and Germany with higher net selling pric- market position in Denmark/Germany as es per volume unit had a positive effect well as a favourable development of the Sales in Western Europe for 2014 were on the revenue development, whereas a product mix. EBIT margin went up by 1% below sales for 2013 when a private reverse development in sales in Italy had 2.1 percentage points to 18.1%. As expect- label agreement was terminated at the a negative effect. ed, the positive developments in EBIT and end of the year. A slight increase in Royal EBIT margin from 2013 to 2014 were less significant in Q4 than for the full year.

WESTERN EUROPE

2014 2013 2014 2013 Q1-Q4 Q1-Q4 Change Q4 Q4 Change

Sales (thousand hectolitres) 3,630 3,680 -1 % 854 924 -8 % Net revenue (mDKK) 2,674 2,650 1 % 595 635 -6 % EBIT (mDKK) 484 424 78 77 EBIT margin (%) 18.1 16.0 13.1 12.1 20 ANNUAL REPORT 2014 Royal Unibrew

ProfilE

Royal Unibrew is the second largest provider of beer and soft drinks to Danish consumers. Fur- thermore, Faxe beer is sold to the German market.

With a combination of strong local, national and international beer brands, Royal Unibrew is the sec- Denmark ond largest Danish beer provider. Royal Beer and the international licence brand Heineken are of- and Germany fered to the entire Danish market, whereas other brands, such as Albani, Ceres and Thor, are offered in areas with strong local rooting. DEVELOPMENTS IN 2014 Within soft drinks, Royal Unibrew offers its own brands as well as For Denmark and Germany it is estimat- The level of innovation was high in 2014 licence-based brands of the Pepsi ed that Danish consumption of beer and with several successful launches of new Group. Own brands comprise Faxe soft drinks increased marginally in 2014 products, packaging and container types Kondi, which is the leading brand as compared to 2013 due to the extraor- as well as consumer-engaging cam- in the lemon/lime segment, as dinarily good summer weather. Con- paigns. The new products include Royal well as Nikoline. The Pepsi prod- sumption of branded products increased Shandy, a beer added grapefruit lem- ucts include Pepsi, Pepsi Max, 7UP to the detriment of discount products. onade and with a low alcohol content; and Mirinda. Egekilde Fruits, a mineral water contain- Royal Unibrew’s sales for 2014 showed ing natural fruit juice and with a low Within spring water and natural a 1% decrease from 2013, whereas net sugar content; and three Tempt shots mineral water, Egekilde is a lead- revenue showed a 2% increase. At the varieties. Danish consumers received the ing Danish brand, which comes in beginning of the year, sales and market new products well, for example Royal a number of taste varieties, still as position were positively affected by high- Shandy achieved a position as the best- well as sparkling. Moreover, Royal er campaign activity than expected in a selling product in its category. Moreover, Unibrew offers the Faxe Kondi major Danish retail chain, whereas the the new Faxe Kondi communication Booster energy drink as well as a termination of a private label agreement platform entitled ”Når der går sport i number of cider, ready-to-drink at the end of 2013 affected sales nega- den” (Becoming a sport) was launched, and shots products under the tively. The higher net revenue per volume and a principal sponsorship agreement Tempt brand. unit is due to a change in both channel was concluded for the new multi-pur- and product mix, including the termina- pose arena in Copenhagen ”Royal Arena”, Royal Unibrew has two produc- tion of the private label agreement, and which is expected to open in 2016. tion facilities in Denmark – one in to a shift in consumption towards cans. It Faxe and one in Odense. is assessed that Royal Unibrew’s market shares on branded beer and soft drinks Both off-trade and on-trade increased slightly from 2013 customers are serviced through direct distribution from own terminals.

Denmark and Germany*

2014 2013 2014 2013 Q1-Q4 Q1-Q4 Change Q4 Q4 Change

Sales (thousand hectolitres) 3,236 3,271 -1 % 783 853 -8 % Net revenue (mDKK) 2,093 2,043 2 % 491 528 -7 %

*(formerly North Western Europe) ANNUAL REPORT 2014 Royal Unibrew 21

ProfilE

Ceres Strong Ale is among the market leaders in the super pre- mium beer segment and holds a considerable market share in this segment.

It is assessed that about 70% of Italy Ceres Strong Ale is consumed out of home, whereas the rest is consumed at home. The general breakdown of the beer market in Italy is 40% out of home and DEVELOPMENTS IN 2014 60% at home. Ceres Strong Ale has achieved a very high distri- The market situation in Italy remains affected by inventory build-ups due to bution in the on-trade channel, marked by economic uncertainty result- excise increases at 1 January 2015. It is where the product has one of the ing in consumer restraint, which is not assessed that Royal Unibrew’s market broadest distributions across beer expected to change in the short term; shares in the premium and super pre- categories. this resulted in increased price competi- mium segments were marginally below tion and downtrading in the off-trade those of 2013. Moreover, Royal Unibrew sells sales channel. It is estimated that, as Ceres Red Erik in the super expected, consumption of premium and In Italy consumer engagement and premium segment as well as the super premium beer declined in 2014. development of the communication lager types Ceres Top Pilsner and Moreover, the bad summer weather in platform for Ceres Strong Ale on the Faxe in the premium segment. this part of Europe resulted in a general social media and on TV are key priorities, reduction in beer consumption. and considerable investments continued Distribution in the on-trade chan- in 2014. Moreover, focus was directed in nel takes place through many Both Royal Unibrew’s sales and net 2014 at further strengthening the com- wholesalers who service and revenue for 2014 showed decreases of mercial customer partnerships in the supply customers or through a 4%. In Q4 sales were slightly positively on-trade channel. number of cash & carry locations where on-trade customers them- selves pick up the goods. Retail customers are serviced either directly to outlets or through distribution centres. All goods in Italy are delivered through third- party suppliers.

Sales efforts in the on-trade channel are primarily directed at wholesalers and cash & carry customers with sales outlets.

Italy

2014 2013 2014 2013 Q1-Q4 Q1-Q4 Change Q4 Q4 Change

Sales (thousand hectolitres) 394 409 -4 % 71 71 0 % Net revenue (mDKK) 581 607 -4 % 104 107 -3 % 22 ANNUAL REPORT 2014 Royal Unibrew

Baltic Sea ANNUAL REPORT 2014 Royal Unibrew 23

sales NET REVENUE EBIT EBIT margin (thousand hectolitres) (mDKK) (mDKK) (%)

4800 3600 300 10 4000 3000 250 9 3200 2400 200 8 2400 1800 150 7 1600 1200 100 6 800 600 50 5 0 0 0 4 2012 2013* 2014 2012 2013* 2014 2012 2013* 2014 2012 2013* 2014

*Including pro forma figures for Finland for the period 1 January – 22 August 2013

The Baltic Sea segment (formerly North net revenue was 1% below the 2013 forma basis, EBIT margin increased by East Europe) primarily comprises the figure. Throughout the segment, but 1.4 percentage points from 8.5% to 9.9%. markets for beer, fruit juices and soft most significantly in Finland, consump- As expected, EBIT for Q4 was negatively drinks in Finland and the Baltic countries tion declined due to consumer restraint; affected by a shift of marketing activities (Lithuania, Latvia and Estonia) and in Fin- this was, however, partly offset by the towards the end of the year. land also wine and spirits brands. Baltic extraordinarily good summer weather in Sea accounted for 49% of the Group’s the region. net revenue and for 36% of EBIT for 2014 (2013: 32% and 18%, respectively). Measured on a pro forma basis, earn- ings before interest and tax (EBIT) were The acquisition of the Finnish Hartwall DKK 39 million above the 2013 figure brewery affected segment developments and, as expected, negatively affected by significantly. Sales and net revenue went non-recurring costs of DKK 50 million up by 70% and 105%, respectively, and for restructuring Hartwall, whereas in the segment is now the Group’s larg- 2013 restructuring costs amounted to est segment measured by net revenue. DKK 18 million. Cost savings from the Measured on a pro forma basis, sales integration process initiated in Hartwall for 2014 were at the 2013 level, whereas had a positive effect. Measured on a pro

BALTIC SEA

2014 2013* 2014 2013 Q1-Q4 Q1-Q4 Change Q4 Q4 Change

Sales (thousand hectolitres) 4,730 4,741 0 % 1,060 1,094 -3 % Net revenue (mDKK) 2,975 3,019 -1 % 666 708 -6 % EBIT (mDKK) 295 256 29 32 EBIT margin (%) 9.9 8.5 4.3 4.5

*Including pro forma figures for Finland for the period 1 January – 22 August 2013 24 ANNUAL REPORT 2014 Royal Unibrew

ProfilE

Hartwall is a multi-beverage busi- ness with a broad product range holding a clear number 2 position in Finland. In the Finnish market Finland Royal Unibrew offers a combina- tion of its own strong local and national brands, international Pepsi and Heineken brands as well as a number of international DEVELOPMENTS IN 2014 wine and spirits brands. As expected, the Finnish market for beer, With a range of own brands such soft drinks, wine and spirits products was as the Karjala and Lapin Kulta affected by consumer restraint, which beer brands, Jaffa (soft drinks), is not expected to change in the short Original (RTD), Upcider (cider), ED term. The extraordinarily good summer (energy drink) and Novelle (miner- weather reduced the declining consump- al water) as well as international tion trend. Adjusted for the summer ef- brands such as Fosters, Heineken fect, it is estimated that consumption in and Pepsi, Hartwall is the market the off-trade channel has decreased by a leader in the categories of mineral low single-digit percentage rate, whereas water, cider and ready-to-drink the decrease in on-trade consumption (RTD) and a strong number 2 in is estimated at a medium single-digit the categories of branded beer, percentage rate. soft drinks and energy drinks. The trading company Hartwa-Trade Sales in Finland were declining in 2014, operates agencies for a number except for Q3 when the extraordinarily of international wine and spirits good summer weather more than offset The integration of Hartwall is progress- brands and contributes a minor the effect of the continuously declining ing satisfactorily. Targeted efforts are part of Hartwall’s revenue. consumption. It is estimated that, as ex- directed at reinforcing Hartwall’s com- pected, Hartwall’s overall market shares mercial position as a market-leading Hartwall operates two produc- on branded products were maintained. beverage provider in Finland; these tion facilities in Lahti (produces A changed channel and product mix efforts are expected to span the coming all products but mineral water) resulted in lower net revenue per volume years. The efficiency improvement of and Karijoki (mineral water), unit in 2014. Hartwall is ahead of schedule, which respectively. affected earnings positively as compared The high level of innovation in Finland to the outlook announced in March 2014, A distribution network of own continued in 2014 with the launch of a whereas market conditions affected terminals supplies off-trade and number of new product varieties and earnings negatively as compared to the on-trade customers directly. line extensions. outlook announced in March 2014.

Finland

2014 2013* 2014 2013 Q1-Q4 Q1-Q4 Change Q4 Q4 Change

Sales (thousand hectolitres) 2,910 2,934 -1 % 653 696 -6 % Net revenue (mDKK) 2,321 2,356 -1 % 526 564 -7 %

*Including pro forma figures for the period 1 January – 22 August 2013 ANNUAL REPORT 2014 Royal Unibrew 25

ProfilE

Royal Unibrew is a significant multi-beverage business in the Baltic countries offering a com- bination of own strong national and regional brands as well as international Heineken brands.

Royal Unibrew’s brewery business Kalnapilio-Tauro Grupe is the sec- ond largest in Lithuania with the Finland national beer brands Kalnapilis and Taurus, as well as Faxe and Heineken as international brands. Cido is the number 2 fruit juice brand in terms of size.

With a complete portfolio of fruit juice products under the Cido brand, mineral water under the Mangali brand and nectar drinks under the Fruts brand, Royal Unibrew’s Cido Grupa in Latvia is the leading provider of fruit juices The Baltic countries and mineral water. With the na- tional beer brands Lacplesa Alus and Livu Alus as well as Heineken as an international brand, Cido Grupa holds a number 3 position DEVELOPMENTS IN 2014 within beer.

Beer and soft drinks consumption in the mix towards products with higher sell- The primary brands in Estonia are Baltic countries increased marginally in ing prices. Cido in the soft drinks category 2014. The overall development was as ex- and Meistriti Gildi and Faxe in the pected. The extraordinarily good summer In 2014 Royal Unibrew penetrated the beer category. weather affected consumption positively. still water category in Lithuania through It is estimated that Royal Unibrew’s the launch of Kalnapilis Norte, a new Royal Unibrew has three produc- market shares on branded products were product in the beverage portfolio. More- tion facilities in the Baltic coun- marginally below those of 2013. over, Kalnapilis White Select, a Belgian- tries – one in Lithuania producing inspired wheat beer, was launched, and beer, and two in Latvia producing Both Royal Unibrew’s sales and net the new beer achieved a 10% market beer and soft drinks, respectively. revenue decreased by 1% in 2014. Sales share in this category. In Latvia a number for Q4 increased by 2% over the cor- of new beer and soft drinks products Sales are made business-to- responding period of 2013, whereas, were launched, eg a Lacplesis special business, and distribution is made due to a general fall in beer prices, net brew and Mangali Vita Fruit, a still water directly to the individual off-trade revenue decreased by 3%. Undiminished with vitamins and fruit flavour. and on-trade customers from focus remains on managing the product own terminals.

The Baltic countries

2014 2013 2014 2013 Q1-Q4 Q1-Q4 Change Q4 Q4 Change

Sales (thousand hectolitres) 1,820 1,830 -1 % 407 398 2 % Net revenue (mDKK) 654 663 -1 % 140 144 -3 % 26 ANNUAL REPORT 2014 Royal Unibrew

Malt Beverages and Exports ANNUAL REPORT 2014 Royal Unibrew 27

sales NET REVENUE EBIT EBIT margin (thousand hectolitres) (mDKK) (mDKK) (%)

900 480 90 25 750 400 75 23 600 320 60 21 450 240 45 19 300 160 30 17 150 80 15 15 0 0 0 13 2012* 2013 2014 2012* 2013 2014 2012* 2013 2014 2012* 2013 2014

*Excluding divested activities in Impec

ProfilE The Malt Beverages and Exports (for- changes had a negative effect. Moreover, merly Malt Beverages) segment com- 2014 has been negatively affected by The business area Malt Beverages and prises the export and licence business significant volatility of local currencies Exports comprises an export and licence for malt beverages and beer exports in several markets. business, primarily relating to non- to other markets. Malt Beverages and alcoholic malt beverages but also to beer Exports accounted for 7% of the Group’s Earnings before interest and tax (EBIT) for exports under the Faxe brand. net revenue­ and for 10% of EBIT for 2014 2014 amounted to DKK 84 million, which (2013: 9% and 15%, respectively). is DKK 3 million above the 2013 figure Royal Unibrew has several internationally and as expected. EBIT margin was 20.7% strong malt beverages brands which are As expected, handsome segment growth and, as expected, lower than for 2013. The sold in the premium segment. Vitamalt is was achieved for both malt beverages reason for this is that, as planned, higher assessed to be the malt beverage brand and beer products. Sales showed a 9% in- investments were made in marketing with the broadest global distribution, crease for 2014, and net revenue showed in 2014 than in 2013. Moreover, the cost whereas Supermalt and Powermalt hold a 7% increase. Exchange rate develop- effect of the sales organisation extension strong regional positions. ments affected net revenue and earnings impacted results throughout the period negatively by less than DKK 1 million in 2014 unlike in 2013. The key market areas for Royal Unibrew’s (Q4 positively by less than DKK 1 mil- malt beverages are countries in the Ameri- lion). Since 2012 net revenue has shown In spite of the negative exchange rate de- cas region and Africa as well as among average organic growth of 15% annually. velopment for most of 2014, the business ethnic groups from these areas living in and In 2014 growth was primarily related to in the Americas achieved net revenue at around major cities in Europe and the USA. increased beer exports. the 2013 level. The malt beverages and exports mar- Sales in the segment are character- As expected, the business in EMEAA kets are primarily supplied by exports ised by large volumes being exported comprising Europe, the Middle East, from Royal Unibrew’s Danish breweries, to distributors at a time, which means Africa and Asia realised high sales and but also in certain cases on the basis of that inventory changes should be taken net revenue growth, primarily relating licence agreements with local breweries. into account when comparing periods. to Africa. This was also so in 2014 when inventory The sales organisation, which is to a large extent located in the individual markets, cooperates closely with our distribution partners on commercial priorities and marketing initiatives.

Malt Beverages and Exports

2014 2013 2014 2013 Q1-Q4 Q1-Q4 Change Q4 Q4 Change

Sales (thousand hectolitres) 614 562 9 % 139 118 17 % Net revenue (mDKK) 407 381 7 % 90 83 9 % EBIT (mDKK) 84 81 16 13 EBIT margin (%) 20.7 21.4 17.7 15.9

ANNUAL REPORT 2014 Royal Unibrew 29

Shareholder Information

Royal Unibrew wants an open dialogue with its shareholders, ments made. For a description of keeping them continuously up-to-date on the Company’s agreements with Company Manage- ment, reference is made to the section development. Therefore, Royal Unibrew emphasises providing Remuneration. timely and adequate information on its objectives and strategy, business activities and the development in the Company’s markets. Treasury shares in 2014 At the AGM on 29 April 2014, the Board of Directors was authorised to acquire treasury shares for up to 10% of the total berg). The trading value amounted to DKK share capital in the period up until the Share capital, DKK 110,985,000 4,759 million (2013: DKK 3,034 million). AGM in 2015. Number of shares 11,098,500 Denomination DKK 10 At the end of 2014, the price of the Royal No treasury shares were acquired in 2014. Number of share classes 1 Unibrew share was 1,087 compared to 736 Restriction of voting right None at the end of 2013. Royal Unibrew’s market Royal Unibrew holds a total of 60,000 Place of listing NASDAQ OMX capitalisation amounted to DKK 12,064 treasury shares of a nominal value of Copenhagen A/S million at the end of 2014 compared to DKK 10 each, corresponding to 0.5% of the Short name RBREW DKK 8,168 million at the end of 2013. Company’s share capital, for the purpose ISIN code DK10242999 of covering the incentive programme Bloomberg code RBREW DC Each share of DKK 10 carries one vote. Any offered to the Executive Board. The total Reuter code RBREW.CO shareholder registered in the Company’s number of shares of the Company is Index Large Cap register of shareholders is entitled to vote. 11,098,500 including treasury shares.

Share information The Board of Directors has been author- Ownership ised to increase the Company’s share At the end of 2014, Royal Unibrew had ap- The Royal Unibrew share is listed on capital on one or several occasions by up prox 14,000 registered shareholders hold- NASDAQ OMX Copenhagen A/S, and to a nominal amount of DKK 11,000,000 ing together 93% of the total share capital. as of 2 January 2015 Royal Unibrew is in the period to 30 April 2019. included in the Large Cap index. On 11 December 2009, Chr. Augustinus Fab- Change of control rikker, Denmark notified Royal Unibrew A/S In 2014 a total of 5,302,326 shares were The realisation of a takeover bid result- that they hold 10.4% of the share capital, traded, corresponding to 48% of the total ing in change of control of the Company and on 4 December 2014, HC Royal Holdng number of shares traded through NASDAQ will entitle a few trading partners and Oy Ab, Finland notified Royal Unibrew A/S OMX Copenhagen A/S (source: Bloom­ lenders to terminate trading agree- that they hold 10.05% of the share capital.

Development in Royal Unibrew’s share capital

DKK ‘ 000 2014 2013 2012 2011 2010

Share capital 1/1 110,985 105,700 111,865 111,865 111,865 Capital reduction -4,800 -6,165 Capital increase 10,085 Share capital 31/12 110,985 110,985 105,700 111,865 111,865 30 ANNUAL REPORT 2014 Royal Unibrew

Members of the Board of Directors and Break-down of shareholders at the end of 2014 the Executive Board are governed by 7% Royal Unibrew’s insider rules, and their share transactions are subject to a notifi- 15% Foreign Investors cation requirement. Individuals with in- Royal Unibrew side information as well as their spouses 44% Foundations and Funds and children below the age of 18 may Danish Institutional Investors trade Royal Unibrew shares only when Individual Danish Investors the Board of Directors has announced Non-registrered that the window for trading shares is 31% open (and provided that they do not have 2% 1% inside information). This normally applies for a period of four weeks following an announcement of financial results.

At 31 December 2014, directors held 3,681 corresponding to up to 10% of the share from being registered as bearer shares to shares of the Company, and members of capital, such authorisation being in force being registered as registered shares in the Executive Board held 104,166 shares, for the period up until the next AGM. order to ensure that the Board of Directors corresponding to a total of 1% of the may continue to exercise its authorisation share capital. Moreover, the Board of Directors proposes to increase the Company’s share capital. the distribution of dividend of DKK 34 per AGM share of DKK 10 for the 2014 financial year. Finally, the Board of Directors recom- The Company’s AGM will be held on mends that the AGM adopt a proposed 28 April 2015, at 5 pm at Ballerup Super It is proposed to increase the basic fee resolution that, as of the 2015 financial Arena in Copenhagen. to the members of the Board of Direc- year, the Company may opt to prepare and tors from DKK 250,000 to DKK 300,000 present its Annual Report in English only. The AGM will be convened electronically, with unchanged multiples of 2.5 and 1.75, and information on the registration respectively, for the Chairman and the Share buy-back programme for electronic communication is Deputy Chairman. The Board of Directors has decided provided at Royal Unibrew’s website to initiate as soon as possible a share www.royalunibrew.com under investor. To ensure liquidity of Royal Unibrew’s buy-back programme of up to DKK 350 shares listed on NASDAQ OMX Copenhagen million in the period to 1 March 2016. Registration of shareholder’s name is A/S and to align the price level per share The purpose of the share buy-back is effected by contacting the bank holding with market practice, the Board of to adjust the capital structure of Royal the shares in safe custody. Directors will recommend that the AGM Unibrew in accordance with the target resolve to implement a one to five share for this. The Board of Directors expects to Board of Directors’ split. A change of the share denomina- recommend to the AGM in 2016 that the resolutions and proposed tion from DKK 10 to DKK 2 is proposed. shares bought back be cancelled. resolutions for the AGM The change of share denomination is ex- The Board of Directors will propose pected to take effect as of mid-June 2015. Investor relations activities that the AGM authorise the Board of Royal Unibrew aims at ensuring open Directors to acquire shares for treasury The Board of Directors recommend to the and timely information to its sharehold- AGM a change of the Company’s shares ers and other stakeholders.

Share ratios

Per share – DKK 2014 2013 2012 2011 2010

Parent Company shareholders’ share of earnings per share 56.5 45.9 35.6 31.8 25.1 Parent Company shareholders’ diluted share of earnings per share 56.2 45.8 35.6 31.8 25.1 Cash flow per share 81.1 62.4 44.2 36.4 44.4 Diluted cash flow per share 80.7 62.2 44.2 36.4 44.4 Year-end price per share 1,087 736.0 492.0 321.5 332.0 Dividend per share 34 0.0 24.0 17.0 12.5 Number of shares 11,098,500 11,098,500 10,570,000 11,186,498 11,186,498 ANNUAL REPORT 2014 Royal Unibrew 31

share performance (Index)

160

140 Royal Unibrew OMX Copenhagen 20 CAP 120 Peer group

100

80 jan feb mar apr may jun jul aug sep oct nov dec

Note: The peer group consists of Carlsberg, Heineken, SABMiller and Anheuser-Busch InBev. Source: Bloomberg

A number of activities are carried out The Royal Unibrew share is followed by: continuously to ensure good contacts with the Company’s stakeholders. In 2014 Company Analyst Royal Unibrew held four audio casts in ABG Sundal Collier Michael Rasmussen connection with the publication of the Carnegie Jonas Guldborg Hansen Annual Report 2013, the Q1 Report, H1 Danske Bank Tobias C. Björklund Report and Q3 Report 2014, respectively. Handelsbanken Peter Sehested Moreover, Royal Unibrew holds analyst Jyske Bank Frans Høyer and investor meetings in both Denmark Nordea Bank Hans Gregersen and abroad in connection with the publi- SEB Enskilda Søren Samsøe cation of Interim and Annual Reports. In Sydbank Morten Imsgard total about 100 individual meetings were held with investors and analysts in 2014.

Among other events, Royal Unibrew par- DIVIDEND DATES for 2015 ticipated in January 2014 in SEB Enskildas 28 April 2015 Resolution at AGM Nordic Seminar in Copenhagen, in May 28 April 2015 Last trading date with right to dividend for 2014 2014 in the DAF Fyn members’ meeting 29 April 2015 First trading date without right to dividend for 2014 at the Albani brewery, in June in DDF 4 May 2015 Distribution of dividend Virksomhedsdag (business day) in Copen- hagen and in December 2014 in Danske Bank’s Winter Seminar in Copenhagen. Financial calendar for 2015

Audio casts and presentations 28 April 2015 Interim Report for the period 1 January – 31 March 2015 from ­audio casts and seminars are 28 April 2015 Annual General Meeting at Ballerup Super Arena in Copenhagen ­accessible at Royal Unibrew’s website, 17 August 2015 Interim Report for the period 1 January – 30 June 2015 www.royalunibrew.com under investor. 25 November 2015 Interim Report for the period 1 January – 30 September 2015

IR CONTACT

Shareholders, analysts, investors, stockbrokers and other stakeholders who have questions concerning Royal Unibrew may contact:

Royal Unibrew A/S Contacts Faxe Alle 1 CFO Lars Jensen (responsible for IR) DK-4640 Faxe [email protected]

Ginette Maasbøl (daily IR contact) [email protected] Telephone +45 56 77 15 12 32 ANNUAL REPORT 2014 Royal Unibrew ANNUAL REPORT 2014 Royal Unibrew 33

Corporate Governance

Royal Unibrew has focus The recommendations of the Committee Diversity on running its business and on Corporate Governance, current leg- designing its management islation and regulation in the area, best A statement is made in accordance with practice and internal rules provide the section 99B of the Danish Financial systems in accordance with framework for Royal Unibrew’s corporate Statements Act. the corporate governance governance. principles. The objective is to Royal Unibrew aims at promoting diver- Royal Unibrew complies with the Corporate sity, which includes achieving a reason- ensure that Royal Unibrew Governance Recommendations with very able representation of both genders, meets its obligations to few exceptions which are described below. both on the Board of Directors and on shareholders, customers, the top management team, based on a The Company’s website http://investor. wish to strengthen the versatility and employees, authorities and royalunibrew.com/governance.cfm pro- total competences of the business and to other stakeholders in the vides a detailed description of the Board improve decision-making processes. best possible way and that of Directors’ approach to the Corporate Governance Recommendations issued by long-term value creation is the Committee on Corporate Governance. supported.

Royal Unibrew complies with the Corporate Governance Recommendations issued by NASDAQ OMX Copenhagen A/S with the following few exceptions:

Board committees (recommendation 3.4): Disclosure of the remuneration policy, The Committee recommends that the board of directors estab- (recommendation 4.2): lish an actual audit committee composed so that the chairman The Committee recommends that the total remuneration of the board of directors is not the chairman of the audit com- granted to each member of the board of directors and the mittee. executive board by the company and other companies in the group, including information on the most important contents • The Board of Directors of Royal Unibrew has decided to take of retention and retirement/resignation schemes, be disclosed on the audit committee tasks jointly. As a result of this, the in the annual report and that the linkage with the remunera- chairman of the Board of Directors is also the chairman of tion policy be explained. the audit committee. The Board’s decision to take on the audit committee tasks jointly should be viewed in light of the • The remuneration of members of the Board of Directors is Company’s size, transparency of reporting and clear proce- disclosed in the section ”Remuneration”. Disclosure of the dures, due to which the Company’s Board of Directors finds remuneration of the individual members of the Executive no need for a separate audit committee. Board is not at present considered material to stakeholders’ assessment. The total remuneration of the Executive Board is disclosed in note 5. The remuneration of the Executive Board is considered in line with that of peer companies. The remuneration of the Executive Board is in accordance with the remuneration policy. 34 ANNUAL REPORT 2014 Royal Unibrew

The international management team The Company believes that a high level The Board of Directors performs its of Royal Unibrew – comprising the of openness in the communication of work in accordance with the Rules of Executive Board and the executives just information on the Company’s develop- Procedure of the Company governing below – comprises 63% (2013: 59%) men ment supports the Company’s work and the Board of Directors and the Execu- and 37% (2013: 41%) women. The target is a fair valuation of the Company’s shares. tive Board. These Rules of Procedure are that the representation of each gen- The Group‘s openness is limited only by reviewed and updated regularly by the der should be at least 40%. When new the duties of disclosure of NASDAQ OMX full Board of Directors. executives are recruited, emphasis is Copenhagen A/S and by competitive placed on identifying candidates of both considerations. The directors usually meet for five an- genders without discrimination, and nual ordinary board meetings, one of Royal Unibrew is seeking to encourage The dialogue with and communication which focuses on the Company’s strate- female candidates’ interest in taking on to shareholders and other stakeholders gic situation and prospects. In addition, managerial tasks. take place by the issuing of Interim Re- the directors meet when required. In ports and other announcements by the 2014 six board meetings were held and At present, six of the directors of Royal Company, via audio casts, meetings with three absentees were noted. Unibrew elected by the general meeting investors, analysts and the press. Interim are men and one is a woman, while the Reports and other announcements are The Board of Directors has established directors elected by the employees are accessible at Royal Unibrew’s website the following committees: three men and one woman. Since 2014 immediately after being published. Our the Board of Directors has had two inter- website also includes material used in Nomination committee national members and five Danish mem- connection with investor presentations The nomination committee consists of bers elected by the general meeting. The and audio casts. the Chairman and Deputy Chairman of target is that the proportion of female the Board of Directors. In 2014 the prima- board members should be around 20%. According to the Articles of Association ry activity of the nomination committee There have been no replacements among of the Company, general meetings shall was the preparation of the evaluation of the board members elected by the gen- be convened not more than five weeks the Board of Directors. The committee eral meeting in 2014; consequently, the and not less than three weeks prior to held one meeting in 2014. 20% target has not yet been reached. the general meeting. It is an objective to formulate the notice convening the Remuneration committee It is the Board of Directors’ objective meeting and the agenda so as to give The remuneration committee consists of that its members should, to the widest shareholders an adequate presentation the Chairman and Deputy Chairman of extent possible, complement each other of the business to be transacted at the the Board of Directors. In 2014 the primary in terms of age, background, national- general meeting. Proxies are limited to a activities of the remuneration committee ity, gender, etc with a view to ensuring a specific general meeting and are formu- were the assessment and recommenda- competent and versatile contribution to lated in such a way as to allow absent tion of remuneration of the Board of the board duties at Royal Unibrew. These shareholders to give specific proxies for Directors and the Executive Board. The matters are assessed when the nomina- individual items of the agenda. All docu- committee held two meetings in 2014. tion committee identifies new candi- ments relating to general meetings are dates for the Board of Directors, and it is published at Royal Unibrew’s website. Audit committee an objective of the committee to identify The Board of Directors of Royal Unibrew both male and female candidates. How- Each share denomination of DKK 10 has decided to take on the audit commit- ever, recommendation of candidates will entitles the holder to one vote. Royal tee tasks jointly. This should be viewed always be based on an assessment of the Unibrew’s shares are not subject to any in light of the Company’s size, transpar- individual candidates’ competences and restrictions of voting rights, and the ency of reporting and clear procedures. how they match Royal Unibrew’s needs Company has only one class of shares. Consequently, the Company’s Board of and contribute to the overall efficiency of Directors finds no need for a separate the Board. audit committee. It is the Board of Work of the Board of Directors’ objective to secure quality and Directors integrity in the Company’s presenta- Shareholder and tion of Financial Statements, audit and stakeholder relations The Board of Directors handles overall financial reporting. At the same time, the strategic management, financial and Board of Directors monitors accounting Royal Unibrew’s Management wants managerial supervision of the Company and reporting processes, the audit of the and works actively to maintain good and as well as continuous evaluation of the Company’s financial reporting, risk issues open communication and dialogue with work performed by the Executive Board and the external auditors’ performance its shareholders and other stakeholders. on behalf of the shareholders. and independence. ANNUAL REPORT 2014 Royal Unibrew 35

Evaluation of the work of the Composition of the Board At present, the Board of Directors Board of Directors of Directors consists of seven members elected by Annual evaluation of the work of the the general meeting and four members Board of Directors is performed. The When composing the Board of Directors, elected by the employees. Election of evaluation is made by the Chairman of we emphasise that the members have members by the employees takes place the Board of Directors. For this purpose the competences required to solve the in compliance with the company law the Chairman receives written replies to tasks. The Board of Directors assesses its rules described at the Company’s web- a questionnaire distributed to all mem- composition annually, including ensuring site. When joining the Board of Directors, bers of the Board. The findings of the that the combined competences and the members elected by the employees evaluation are presented and discussed diversity of the members match the are offered relevant training in serving at a meeting of the Board of Directors. Company’s activities. on a board. The evaluation in 2014 did not give rise to changing the composition of the Board Candidates for the Board of Directors are All members of the Board of Directors of Directors as the necessary compe- recommended for election by the general elected by the general meeting are tences are considered to be in place. meeting supported by motivation in ­considered independent in accordance Moreover, the evaluation did not give writing by the Board of Directors as well with the Corporate Governance Recom- rise to changing the working method of as a description of the recruiting criteria. mendations included in the “Rules for the Board of Directors. The individual members’ competences Issuers of Shares” of NASDAQ OMX are described in the below section on Copenhagen A/S. The Executive Board and the cooperation the Board of Directors and the Executive between the Board of Directors and the Board. When joining Royal Unibrew, new Executive Board are evaluated on an an- members of the Board of Directors are nual basis as a minimum. given an introduction to the Company and to the markets in which it operates. 36 ANNUAL REPORT 2014 Royal Unibrew

Risk Management

Risk management plays a key taking of required measures to address Local entities (staff functions and busi- role at Royal Unibrew, and the risks. ness units) are responsible for identify- it is Management’s aim that ing, assessing, quantifying and recording risks as well as for reporting how risks the Group’s risks should be Risk management and are managed locally. The local-level risk adequately disclosed at all management structure assessment follows the same principles times. Policies and procedures as the group-level assessment based The full Board of Directors, which also on the ”heat map” assessment system. have been determined to performs the function of audit com- Local risk owners have been appointed ensure efficient management, mittee, has ultimate risk management with responsibility for currently monitor- to the widest extent possible, responsibility. The auditors appointed at ing and/or reducing risks through risk- the general meeting participate in board mitigating activities. of the identified risks. meetings that concern the tasks of the audit committee. The audit committee Royal Unibrew’s Group Accounting is At Royal Unibrew risk management is an monitors the total strategic risk exposure responsible for facilitating and following integrated part of the operational activi- and the individual risk factors relating to up on risk-mitigating activities/action ties with a view to reducing the uncer- Royal Unibrew’s activities. The Board of plans for the key risks in accordance tainty of the Group’s strategic objectives Directors adopts guidelines for the key with the decisions made by the Board of being met. risk areas, monitors developments and Directors and the Executive Board. ensures the existence of plans to man- The key risks are summarised by the fol- age the individual risk factors, including lowing main areas: commercial and financial risks. Risk assessment in 2014

• Industry and market risks In 2014 Royal Unibrew’s Executive Board • Exposure hazard and third-party risks Efficient risk management closely monitored the development • Financial risks (currency, interest rates, in market-related risks and made the liquidity) At least once a year, the Board of Direc- necessary changes to risk-mitigating • Credit risks (financial institutions and tors assesses the overall risk factors re- activities to secure budgeted earn- commercial receivables) lating to Royal Unibrew’s activities. Risks ings. Moreover, local risk management • Environmental risks are assessed under a two-dimensional workshops were held with participation “heat map” assessment system which by risk owners and other executives. Cen- A detailed description of the Company’s estimates the significance of the risk in trally, the identified risks and proposed risks is provided in note 2. relation to EBITDA, damage to Royal Uni- action plans were reviewed and assessed brew’s reputation, violation of legislation by the Company’s Executive Board. Based or environmental implications as well as on this, the Executive Board presented Risk management structure the probability of the risk resulting in an the key risks to the Board of Direc- incident. Based on this assessment, the tors and recommended the necessary Royal Unibrew’s risk management struc- existing ”heat map” is updated so as to risk-mitigating activities/action plans ture is based on a systematic process of reflect changes in the understanding of for approval by the Board of Directors. risk identification, risk analysis and risk business risks. Following this registra- The Board of Directors then resolved to assessment. This structure provides a tion of risks relating to Royal Unibrew’s implement the necessary risk-mitigating detailed overview of the key risks relat- activities, the risks which may materially measures with a view to ensuring ing to the realisation of strategies in the impact the strategic objectives in the optimum realisation of Royal Unibrew’s short and long term and enables the short and long term are identified. strategic objectives. ANNUAL REPORT 2014 Royal Unibrew 37

Key risk factors in 2015

In addition to financial risks, the following risk factors are considered key risks in 2015:

Area Description Risk mitigation

Macro­ Royal Unibrew’s product portfolio is sold in markets and market By focusing on flexibility in its actions plans, Royal economic areas where market developments are usually determined by Unibrew is seeking to secure leeway for reducing the uncertainty long-cycle trends. However, in connection with the financial crisis effect of macroeconomic uncertainty and changes to and the resulting economic effects, markets have been more consumption patterns. volatile than previously experienced. Thus, considerable market fluctuations have been seen for certain product categories and The efforts directed at continuous improvements in certain markets. At the beginning of 2015, several of Royal across the business will contribute towards limiting Unibrew’s markets are still affected by consumer restraint, see the negative effect of macroeconomic changes. the Outlook 2015 section on page 12.

Macroeconomic uncertainty and low growth of long duration may affect earnings negatively. This could happen due to declin- ing consumption or shifts in product mix towards products with lower earnings.

Industry In most markets, the product category beer and soft drinks is Royal Unibrew’s earnings and competitiveness are and market characterised by tough price competition and intensive market- ensured through constant focus on markets and seg- ing from a number of suppliers. At the same time, continuous ments in which Royal Unibrew holds or may achieve a consolidation is seen among customers who handle the distribu- significant position. Moreover, the Company focuses tion of products to consumers. Furthermore, Royal Unibrew’s on value management through the development of market area is characterised by considerable industry concentra- products, containers and packaging, cooperation with tion on the supplier side. customers and communication with consumers.

The efforts directed at continuous improvements across the business will contribute towards limiting the negative effect of industry concentration.

Weather Usually, the consumption of Royal Unibrew’s products is high Through focus on flexibility of action plans, Royal in the summer months. However, this presupposes dry and fair Unibrew aims at securing leeway to respond to lower weather. In the summer months of 2014 the weather in Royal earnings caused by unfavourable weather conditions Unibrew’s main markets except for Italy was favourable to the in the summer months. consumption of beer and soft drinks. As in 2013, this affected the Group’s sales and net revenue, and thus earnings, positively.

Commodity The prices of a large number of key commodities fluctuate in Royal Unibrew monitors the trend in commodity prices line with world market prices. To the extent that higher unit cost prices hedging against short-term price increases cannot be compensated for by higher selling prices per unit or through agreements with suppliers and through in other ways increasing the average selling price per unit cor- commodity hedges if considered essential and eco- respondingly, Royal Unibrew’s earnings will decrease. In order to nomical. The Group’s policy for hedging commodity maintain EBIT margin, selling prices per unit must increase more risks involves a smooth and time-differentiated effect than the unit cost increase. of commodity price increases. Moreover, there is systematic focus throughout the Group on streamlin- ing the production and distribution process and on increasing net selling prices per unit.

Statutory Royal Unibrew’s activities are subject to national legislation in the Royal Unibrew participates in local and international restrictions markets in which Royal Unibrew operates. Any legislative changes cooperation fora within the brewery industry with may impact the ability to operate, eg by way of restrictions in a view to influencing legislative decision makers to respect of the sale, marketing and production of Royal Unibrew’s ensure that conditions for producing and market- products or due to increasing consumption taxes. Such restric- ing beer and soft drinks do not deteriorate, and that tions may affect the Group’s sales and earnings significantly. consumption taxes are applied in a balanced manner. 38 ANNUAL REPORT 2014 Royal Unibrew

Control and risk Information and communication Royal Unibrew’s information systems are management activities The Board of Directors emphasises that designed with a view to continuously, relating to the financial the Group communicates openly, with with due regard to the confidentiality reporting process due regard to the confidentiality required required for listed companies, identify- for listed companies, and that the indi- ing, capturing and communicating at Royal Unibrew’s internal control and risk vidual knows his/her role with respect to relevant levels relevant information, management systems relating to the internal control. reports, etc which enable the individual financial reporting process are described to perform tasks and controls efficiently below. The individual business areas of the and reliably. Group have been established as business Control activities units with responsibility for their own Monitoring Royal Unibrew has established a formal- strategies, action plans and budgets. Monitoring is effected by continuous ised group reporting process comprising This division results in efficient follow-up assessments and controls at all group monthly reporting, including budget and distribution of responsibilities in the levels. The scope and frequency of the follow-up, assessment of performance Group. periodic assessments depend primarily and achievement of established targets. on a risk assessment and the efficiency Royal Unibrew’s accounting manual as of the continuous controls. Moreover, a central corporate function is well as other reporting instructions are responsible for controlling the financial continuously updated and are available The auditors appointed by the general reporting from the subsidiaries, which at Royal Unibrew’s intranet, where they meeting report in the Auditor’s Long- also includes a statement from each can be accessed by all relevant employ- form Report to the Board of Directors reporting group entity in relation to ees. The instructions include account material weaknesses in the Group’s compliance with adopted group policies coding instructions and procedures for internal control systems in connection and internal control measures. In 2014 financial reconciliation and analyses, with the financial reporting process. Less controlling visits were paid to the key verifying the existence of assets as well material issues are reported in manage- subsidiaries. The Board of Directors has as policy for credit granting and approval ment letters to the Executive Board, after assessed that establishment of an actual of fixed asset investments. In the event which the Executive Board informs the internal audit department is not required of major changes, all responsible finance Board of Directors of the issues reported. at this time considering the moderate officers of the group enterprises are complexity of the Group and the trans- informed in writing of the key changes. The Board of Directors meets twice parency of its reporting. Moreover, internal update courses are annually with the auditors without the organised for accounting staff. Executive Board attending. ANNUAL REPORT 2014 Royal Unibrew 39

CMYK 0/30/100/0

CMYK 0/0/0/100

CMYK 0/0/0/0 40 ANNUAL REPORT 2014 Royal Unibrew

Remuneration

The remuneration policy Board of Directors The Executive Board members are em- applying to Royal Unibrew’s remuneration ployed on individual service contracts, Board of Directors and and the terms are fixed by the remunera- Efforts are made to ensure that the tion committee within the framework Executive Board has been Board of Directors remuneration match- laid down in the contracts, see below. formulated so as to reflect es the level of peer companies and to shareholder and company accommodate the requirements relating The remuneration committee assesses to members’ competences, performance the Executive Board remuneration an- interests. Moreover, the and scope of board work, including the nually to ensure that the remuneration remuneration policy is intended number of meetings. matches the situation at peer compa- to support the realisation nies. The annual remuneration paid to of the Company’s long-term ordinary board members amounts to The Executive Board is remunerated by objectives. DKK 250,000. The Chairman and Deputy a market-conforming and competitive Chairman receive remuneration of remuneration package comprising four 2.5 times (DKK 625,000) and 1.75 times elements: (DKK 437,500) the remuneration paid to ordinary members. The total remunera- • Fixed salary based on market level; The following is a brief description of the tion paid to the Board of Directors in • Ordinary bonus, see overall guidelines elements of the remuneration, pension 2014 amounted to DKK 3.2 million. for incentive pay; plans and severance programmes as well • Long-term bonus, see overall guide- as other benefits offered to the Board of The Board of Directors remuneration is lines for incentive pay; Directors and the Executive Board. fixed and no remuneration is paid for • Extraordinary bonus, see overall guide- participation in the committees set up lines for incentive pay. The complete remuneration policy by the Board of Directors. The remunera- for the Board of Directors and the tion for the financial year in progress is As part of Royal Unibrew’s continued ef- Executive Board is disclosed at the submitted for approval at the AGM. The forts to focus on adding value for share- Company’s website http://investor. Board of Directors does not participate in holders, the Executive Board was in 2013 royalunibrew.com/documentdisplay. any incentive schemes. offered restricted (conditional) shares cfm?DocumentID=11831. for no consideration. The programme replaced the previous cash-based, long- For a description of incentive pay, refer- Executive Board term bonus scheme and entered into ence is made to the Overall Guide- remuneration force on 1 September 2013. A restricted lines for Incentive Pay adopted at the share entitles the holder to receive Company’s general meeting, which may The Board of Directors believes that a one Royal Unibrew share of a nominal be downloaded from http://investor. combination of fixed and performance- value of DKK 10 for no consideration royalunibrew.com/payprogram.cfm. driven remuneration to the Executive when the Company’s Annual Report for Board contributes towards ensuring that 2016 has been published in March 2017. Royal Unibrew can attract and retain the The receipt of shares is conditional on right employees. At the same time, the continued employment in the period up Executive Board is given an incentive to to the Board of Directors’ adoption of create shareholder value through par- the Annual Report for 2016 and on the tially incentive-based remuneration. employee not having handed in notice. ANNUAL REPORT 2014 Royal Unibrew 41

The number of shares depends on the Royal Unibrew A/S may terminate the extent to which the EBIT and free cash employment of a member of the Execu- flow targets for the financial years 2013- tive Board at up to 24 months’ notice, 2016 defined by the Board of Directors whereas the employment of other are achieved in the vesting period. The members of the Executive Board may be maximum number of restricted shares is terminated at 12 months’ notice. Sever- 60,000 shares, corresponding to a value ance pay agreed upon cannot exceed of DKK 33 million at the time of granting, two years’ salary according to the remu- 28 August 2013. neration policy.

The total remuneration of the three In case of a full or partial takeover of members of the Executive Board Royal Unibrew A/S, the Executive Board amounted to DKK 30.9 million in 2014. will receive no compensation. However, See also note 5. two members of the Executive Board may choose to consider themselves In addition a number of work-related dismissed in such event. benefits are made available to the Executive Board, including a company car, and the Executive Board members are covered by Royal Unibrew’s standard insurance schemes such as accident and life insurance. 42 ANNUAL REPORT 2014 Royal Unibrew

Board of Directors and Executive Board

Board of Directors

Kåre Schultz Walther Thygesen Ingrid Jonasson Blank Chairman of the nomination committee and Deputy Chairman of the nomination com- Board member the remuneration committee mittee and the remuneration committee Position Position Position Professional board member in a number of Executive Vice President of Novo Nordisk A/S Professional board member in a number of Nordic enterprises since 2010 since January 2014 enterprises since 2014 Special competences Special competences Special competences Special expertise in general management, Special expertise in strategic management Special expertise in general management including of international enterprises in the as well as experience of production, sales with experience from both Denmark and convenience goods and retail areas as well as and marketing of brands on a global scale abroad as well as sales and marketing exper- FMCG (Fast Moving Consumer Goods) tise, especially in the business to business Independence market Independence Considered independent Considered independent Independence Member of the board of directors Considered independent Member of the board of directors LEGO A/S Ambea Vård & Omsorg AB, Sweden Chairman of the board of directors Musti ja Mirri Grp Oy, Finland Alectia A/S Orkla ASA, Norway Xilco Holding AG, Switzerland Fiskars Ojy, Finland Matas A/S, Denmark ZetaDisplay AB, Sweden Travel Support & Services Nordic AB, Sweden Bilia AB, Sweden Norm Research & Consulting AB, Sweden ANNUAL REPORT 2014 Royal Unibrew 43

Board of Directors, continued

Jens Due Olsen Karsten Mattias Slotte Jais Valeur Board member Board member Board member

Position Position Position Professional board member in a number of Professional board member in a number of Executive Vice President Global Categories & Danish enterprises since 2008 enterprises, primarily in Finland since 2013 Operations with Arla Foods amba

Special competences Special competences Special competences Special expertise in economic, financial and Special expertise in general management, Special expertise in general management capital market aspects as well as general including of international enterprises within of international enterprises within FMCG management with experience from a variety FMCG (Fast Moving Consumer Goods) (Fast Moving Consumer Goods) of industries Independence Independence Independence Considered independent Considered independent Considered independent Member of the board of directors Chairman of the board of directors Chairman of the board of directors Onninen Oy, Finland Systemfrugt A/S NKT Holding A/S Onvest Oy, Finland AtchikRealtime A/S Fiskars Oyj, Finland Member of the Board of Directors Pierre.dk A/S Varma Mutual Pension Insurance Company, Foss A/S Amrop A/S Finland Mejeriforeningen Amba Auriga Industries A/S Scandi Standard Ab (publ), Sweden

Deputy chairman of the board of directors Bladt Industries A/S

Member of the board of directors Auris III Luxembourg S.A., Luxembourg Cryptomathic A/S Gyldendal A/S Industriens Pensionsforsikring A/S Heptagon Advanced Micro Optics Inc.

Other offices held Member of investment committee of LD Equity 2 K/S Member of the Committee on Corporate Governance 44 ANNUAL REPORT 2014 Royal Unibrew

Board of Directors, continued

Hemming Van Martin Alsø Jørgen-Anker Ipsen Board member Business Unit Manager Export Area Manager

Position Position Position CEO of Daloon A/S Elected by the employees Elected by the employees

Special competences: Special expertise in retailing and marketing as well as production and general manage- ment

Independence Considered independent

Executive board service CEO of Easy Holding A/S Director of HV Invest ApS Director of HV Holding ApS, Chri Van ApS, Ka Van ApS, Se Van ApS, The Van ApS Kirsten Wendelboe Liisberg Søren Lorentzen Chairman of the board of directors Brewery Hand Brewery Hand Easyfood A/S FHØ af 27.05.2011 A/S Position Position GOG Holding A/S Elected by the employees Elected by the employees GOG Sport A/S Halberg A/S Mac Baren Tobacco Co. A/S

Member of the board of directors Daloon A/S Easy Holding A/S Great Dane A/S HV Invest ApS

BOARD OF DIRECTORS IN Royal Unibrew

Number of Year of initially Term of Royal Unibrew shares change from Name birth elected office Position held at 1 January 2015 1 January 2014

Kåre Schultz 1961 2010 2014 Chairman - - Walther Thygesen 1950 2010 2014 Deputy Chairman 1,100 - Martin Alsø 1974 2014 2014-2018 Board member elected by the employees 880 -50 Ingrid Jonasson Blank 1962 2013 2014 Board member - - Jørgen-Anker Ipsen 1958 2014 2014-2018 Board member elected by the employees 46 - Kirsten Wendelboe Liisberg 1956 2006 2014-2018 Board member elected by the employees 162 - Søren Lorentzen 1964 2010 2014-2018 Board member elected by the employees 172 - Jens Due Olsen 1963 2010 2014 Board member - - Karsten Mattias Slotte 1953 2013 2014 Board member - Jais Valeur 1962 2013 2014 Board member - - Hemming Van 1956 2004 2014 Board member 1,321 - ANNUAL REPORT 2014 Royal Unibrew 45

Executive Board

Henrik Brandt Lars Jensen Johannes F.C.M. Savonije President and CEO as of November 2008 CFO as of November 2011 COO as of September 2008

Qualifications Qualifications Qualifications MSc (Economics and Business Administra- Diploma in business economics, informatics BA Business Administration tion), MBA Stanford University, California and management accounting, Copenhagen Business School Member of the board of directors Executive board service Dansk Retursystem Holding A/S Brandt Equity ApS including subsidiaries Brandt Equity 2 ApS Hansa Borg Holding AS including Uno Equity ApS subsidiaries, Norway Global Sports Marketing S.A., Zürich, Chairman of the board of directors Switzerland Toms Gruppen A/S Globalpraxis S.A., Barcelona, Spain Brandt Equity ApS Brandt Equity 2 ApS Uno Equity ApS

Member of the board of directors Ferd Holding AS, Norway Hansa Borg Holding AS including subsidiaries, Norway Gerda og Victor B. Strands Fond, Toms Gruppens Fond

Other offices held Chairman of the corporate law committee of the Confederation of Danish Industry

EXECUTIVE BOARD IN Royal Unibrew

Number of Year of Royal Unibrew shares change from Name birth Position held at 1 January 2015 1 January 2014

Henrik Brandt 1955 CEO 76,800 - Lars Jensen 1973 CFO 4,666 +472 Johannes F.C.M. Savonije 1956 COO 22,700 -

ANNUAL REPORT 2014 Royal Unibrew 47

Organisation and Employees

Royal Unibrew directs targeted management culture is always based on been to create increased flexibility in the efforts at developing managers the principles that can take the business day-to-day work to enable employees and employees to create the further. to handle several functions and more readily replace each other. Sales force de- best possible basis for realising In 2014 general management training velopment has been a focus in all Royal our strategy and achieving our was carried out in Denmark with focus Unibrew’s markets. Efforts included on- business targets. Focusing on on the management and value DNA the-job training, strengthening of sales of Royal Unibrew in order to enable management competences, individual increased adaptability and will- managers to establish a shared language coaching as well as actual sales courses ingness to change, we carried and a common understanding of what and small workshops. Furthermore, a out a number of activities in it takes to practise good management. joint training programme was carried To increase management efficiency and out for the logistics and sales channel 2014 with a view to strength- learning within the organisation, the within Retail in Denmark with good and ening our organisational ability training emphasised cross-functional uniform customer service as the pivotal to handle future challenges. cooperation and networking and focused point. on key management themes like motiva- tion and feedback. Moreover, managers’ In Finland the organisation also directed general competences within eg recruit- efforts at increasing flexibility through, Royal Unibrew works strategically at ing were strengthened. among other things, job rotation among developing our employees’ competences hourly-paid employees. Moreover, target- to ensure that the overall organisation Royal Unibrew focuses on creating ed efforts were directed at establishing a remains competitive and is capable of career development and career paths pool of temporary manpower which may exploiting development opportunities for the individual employee. As part of be called upon in peak seasons. and reading market trends. It is moreover these efforts, emphasis is on, among essential that our employees are happy other things, job rotation and internal In Italy Royal Unibrew introduced ”Ceres and not least proud to work at Royal recruiting for key positions. This ensures Academy” in 2014, which is a platform Unibrew. rooting of knowledge of activities as well for corporate culture training. The aim as optimisation of cooperation across of the initiative is to contribute towards the business. Moreover, targeted efforts strengthening the cohesion of the Italian Targeted competence are directed at a number of key develop- organisation as well as the competences development of managers ment activities which are to support of the individual employees. Employees and employees the overall strategic objectives of the from all parts of the Italian organisation organisation. participated in the training, and subjects Optimisation and integration of the total included presentation and negotiation organisation are high on Royal Unibrew’s In Denmark efforts were directed in 2014 skills, IT as well as beer knowledge. agenda. This requires managers who are at ensuring knowledge sharing among able to manage and implement strate- hourly-paid employees based on the gies across countries and cultures. Royal competences that the employees have Organisational Unibrew managers receive continuous gradually developed and acquired during development and change management training, and the funda- the EU-backed project ”Medarbejdere i management mental management principles of the Verdensklasse” (World-class employees). business are adjusted currently to match A focus in that connection was how Changes and increased requirements business developments and changes in the individual employee may develop in respect of flexibility and adaptability external demands. This ensures that the broader competences. The purpose has were organisational focuses throughout 48 ANNUAL REPORT 2014 Royal Unibrew

2014. Faced with still more rapid market physical working environment at Royal agement across the entire Royal Unibrew changes, both the individual employee Unibrew. organisation. The intranet is an impor- and the organisation as a whole must be tant tool to strengthen the relevant able to adapt. It is crucial that our em- In Denmark joint safety training has integration between the various entities, ployees are equipped in the best possible been initiated with focus on so-called including to support a shared culture to way to handle these changes. behavioural safety in connection with form the basis of continued strengthen- which the role of the individual in rela- ing of Royal Unibrew. Especially Finland had great manage- tion to health & safety is verbalised and ment focus on integrating the Finnish clarified. The objective is to develop a cul- It is the ambition that UniWorld should organisation into Royal Unibrew. In 2014 ture in which responsibility for these key become an important part of the busi- management competences were ex- organisational factors is also assigned ness and communication across Royal changed especially between the Danish to the individual employee so that he/ Unibrew, and that, over time, UniWorld and Finnish organisations to ensure the she can make a difference in relation to will develop into the place where em- necessary support and decision-making organisational health & safety. By means ployees share knowledge and discuss power in relation to realising the chang- of specific tools and increased aware- tasks, projects, etc. es, which have been part of the strategy ness of the individual’s own role when it since the acquisition of Hartwall. With comes to health & safety issues, efforts focus on efficiency-enhancing measures will be directed at reducing both ac- IT initiatives and systems and streamlining of the organisation, cidents and sickness. In that connection, efforts were directed at making the 21 ambassadors have been appointed to Royal Unibrew has continuous focus on business more agile and competitive. lead the way and guide their colleagues implementing new and improving existing This required fundamental, structural on safety issues in cooperation with the IT systems to increase the efficiency and to changes in the organisation, including a existing health & safety organisation. In align business processes across the Group. number of cultural changes. Finland health & safety efforts have pri- marily been directed at reducing absence In 2014 a migration project was realised due to sickness by increasing focus on to sever Hartwall’s links to Heineken’s Performance management causes and patterns of the absence. IT systems. Moreover, a new laboratory system, new group reporting systems In connection with the overall compe- and improved accounting processes were tence development work, increased UniWorld – a shared implemented, and the logistics process focus was directed in 2014 at identifying platform for in the Baltic countries was optimised. and developing employee and manager communication and potential. To support these efforts, a knowledge sharing In 2015 and early 2016, the Group’s SAP systematic performance management platform will be implemented at Hart- process has been developed. The primary The autumn of 2014 saw the launch of wall. A shared platform will create syner- purpose is to identify high perform- a new intranet, UniWorld, which is a gies through process standardisation as ers in all parts of the organisation and general platform for communication, well as consolidation and optimisation of to consider the potential among these knowledge sharing and document man- the Group’s overall IT operations. employees in relation to both specialist roles and management positions.

At the same time, the efforts in this area contribute towards retaining talents and key employees and ensuring that they are offered the right challenges.

Health & safety efforts

To secure employee satisfaction and safety, continuous efforts are directed at optimising and strengthening organi- sational health & safety. The health & safety groups carry out local as well as cross-organisational initiatives in order to strengthen both the mental and ANNUAL REPORT 2014 Royal Unibrew 49

Corporate Social Responsibility

We want to make a positive Focus areas of our corporate social difference for our consumers responsibility work and to create value for our stakeholders. In order to do that, we must apply clear Environment principles and strategies Occupational Food safety health to the management of our & quality & safety business. Consumers in all our markets must be able to rely on our products being Corporate social of a very high quality and responsibility Royal Competence Unibrew’s produced under safe conditions. development ethical At the same time, we must guidelines continuously seek to reduce our environmental impact and Anti-corruption Responsible & consumption contribute positively to the competition overall development of society.

A statement is made in accordance with section 99A of the Danish Financial Statements Act. “Quality, food safety and environmen- ers, which contributes towards increas- tal policy” and our “Policy for product ing production efficiency and decreasing Our corporate social responsibility work safety” provide the overall framework for wastage and towards reducing non-fi- is an integrated part of Royal Unibrew’s our corporate social responsibility work. nancial risks and creating and sustaining business approach, and our efforts in this The said policies are available at Royal a strong corporate identity and culture. area are based on our values and the ten Unibrew’s website. At the same time, these efforts con- principles of the United Nations Global tribute towards creating new business Compact in respect of human rights, At Royal Unibrew we have chosen to fo- opportunities. labour standards, environment and anti- cus on continuous improvements rather corruption. than long-term objectives on which focus by the individual employee in the Occupational health & “Royal Unibrew’s Code of Ethics” is the day-to-day work may be a challenge. This safety Management’s guidance to all group approach has produced good improve- employees on ethical issues, including ments in many areas for a number of Royal Unibrew must be a safe and healthy targets and guidelines for the enforce- years, which will continue in the future. place to work for its employees, and Royal ment of human rights within the Group Unibrew’s health policy therefore focuses and with business partners. “Royal The CSR efforts support a good dialogue on preventive measures to avoid employ- Unibrew’s Code of Ethics” as well as our with consumers, customers and suppli- ees being worn out and incurring work- 50 ANNUAL REPORT 2014 Royal Unibrew

related injuries and on actively promoting Selected targets for 2015 • We ensure that our marketing prac- safety, job satisfaction and efficiency. • It remains the target to reduce the tices are in compliance, at all times, number of occupational accidents with the marketing legislation in the The preventive measures at the brewer- to zero and to continue the focused areas in which our products are sold. ies in 2014 included the following: safety efforts. • We value responsibility in our corporate • In Denmark all employees at the Albani culture and expect our employees to Denmark brewery as well as distribution workers demonstrate such responsibility in the • All operators and salaried employees must participate in a course on behav- day-to-day handling of our products. at the Danish breweries participated in ioural safety, reporting of near-accidents a comprehensive training programme is to continue and the ambassador role Royal Unibrew supports The Brewers of on behavioural safety. Moreover, a must be profiled at all locations. Europe campaigns on responsible alcohol group of employees were trained as • The Danish safety groups will also in consumption and attaches great impor- ”ambassadors” with responsibility for 2015 organise a joint health & safety tance to responsible drinking. unfolding the health & safety dialogue discussion as well as a joint health & in the organisation. safety day. Royal Unibrew employees engaged in • All safety groups participated in a joint • Action plans relating to workplace product marketing are currently trained health & safety day. assessment will be completed and and instructed in compliance with exist- • A workplace assessment was carried implemented. ing marketing legislation. Compliance out among all employees in Denmark, • In the Baltic countries fire alarms and with existing marketing practices and and based on this action plans are be- warning systems must be upgraded to legislation is part of Royal Unibrew’s ing prepared. reduce the risk in connection with a fire. agreements with customers and part- • Finland has a target also for 2015 of ners, eg in the on-trade segment. Lithuania being above industry average when it • In Lithuania working conditions at the comes to occupational health & safety. In addition to complying with marketing distribution warehouses were consid- This is to be achieved by, among other legislation and the above-mentioned erably improved. Manual palletisation things, selected employees in Hart- guidelines, Royal Unibrew gets involved was replaced by automated solutions; wall’s production in Lahti, who have in customers’ communication on con- palletisation and order picking are now been fully trained in the Dupont sumption of the Company’s products in now carried out far more efficiently STOP program (safety program), relation to advertising, sponsorships and and safely than previously by means of focusing on the registration of near- campaigns. Compliance with marketing safe and ergonomic lifting equipment. accidents and subsequent follow-up. legislation and certain guidelines are Moreover, in cooperation with our included in Royal Unibrew’s cooperation Finland insurance partner in Finland, a project agreements with customers. • Hartwall’s alcohol awareness policy has been initiated to increase road safe- as well as equal opportunity guide- ty primarily among sales consultants. Royal Unibrew also has a responsibility for lines were updated and implemented. Furthermore, the rotation level among preventing any abuse problems among its It was decided that in the period production workers in Lahti has been employees. In Denmark a number of key December 2014 to April 2015 Hartwall increased to avoid repetitive work. individuals across the organisation have will gradually introduce a no-smoking been trained in supporting colleagues policy in order to further improve and with a potential over-consumption of al- support its employees’ well-being and Responsible alcoholic cohol/intoxicants, including encouraging working capacity. beverage and soft drinks treatment, and in helping their colleagues • Within supply chain Hartwall continu- consumption get back to work again as easily as pos- ously makes use of preventive safety sible following treatment. observations with a view to observ- Royal Unibrew’s commitment to respon- ing, discussing and supporting safe sible marketing and consumption of In Latvia Royal Unibrew along with other behaviour. At Hartwall the key health beverages is rooted in the following core soft drinks producers supported the & safety ratios are above industry principles: preparation of a joint code for responsi- average, and absence due to sickness ble marketing of soft drinks, and in 2014 continues to decline. • We engage consumers and stakehold- campaigns on balanced consumption of ers and work collectively with them to beverages were initiated. These measures combined have resulted promote responsible enjoyment of our in a reduction of the total number of products. Moreover, the Baltic countries have focus occupational accidents by more than half • We respect that beer consumption is on promoting beer with a lower alcohol in 2014, and the number is now at the for adults only and is a matter of indi- content, and non-alcoholic beer sales lowest level in five years. vidual choice and accountability. have gone up. ANNUAL REPORT 2014 Royal Unibrew 51

As an element in Royal Unibrew’s re- cluding eg the principles on child labour Energy sponsibility with respect to reducing the laid down by UNICEF, the UNGC and Save consumption of soft drinks containing the Children. In 2014 energy consumption developed sugar, efforts are continuously directed satisfactorily for Royal Unibrew as a at promoting calorie-reducing products It is also Royal Unibrew’s aim that suppli- whole. Energy consumption per unit pro- such as Nikoline with 30% less sugar ers and partners should comply with the duced decreased by 8.7% to 86.7 MJ/hl. or sugar-free alternatives such as Jaffa ethical guidelines, and that these should The reduced consumption is the result of Light, Faxe Kondi Free, Pepsi Next and be incorporated into the Company’s partly the effect of measures introduced Pepsi Max. terms of trading with key suppliers. Royal in 2013, partly the effect of the integra- Unibrew is only exposed to suppliers tion of Hartwall’s Lahti brewery into the Through a variety of sponsorships, Royal outside the EU to a very limited extent. energy accounts. Unibrew supports sports and health initi- atives at both national, regional and local Also in 2014 an ethical audit was per- Energy consumption at the Danish brew- level across national borders; moreover, formed according to a customer-specific, eries was 73.6 MJ/hl in 2014 – slightly our distributors in for example the malt international ethical standard at Royal more than 1.5% below the 2013 figure. area support various initiatives locally. Unibrew’s brewery in Faxe. In connection with this audit, the internal guidelines At the Albani brewery in Denmark, Selected targets for 2015 were further developed. reduced evaporation during wort boil- • Participation in and development ing as well as the installation of an air of ”Responsible beer and soft drinks Selected targets for 2015 preheater on the gas boiler contributed consumption” in cooperation with • Continued training of Royal Unibrew towards energy savings, and LED lights local industry organisations and The employees in ethical values and guide- at both Danish and foreign breweries Brewers of Europe. lines. also reduced energy consumption. At the • Annual training of all relevant employ- • As part of our cooperation with key Faxe brewery, the PET line and cleaning ees in responsible marketing of bever- suppliers, Royal Unibrew’s ethical processes were furthermore optimised, ages and continuous monitoring of guidelines are reviewed at annual and buildings were insulated, which compliance with existing rules as well status meetings. reduced energy consumption further. as activities in new marketing media. • Maintenance of certification under the • Workshop for in-house ”alcohol and customer-specific ethical standard. At the distribution warehouse in Lithu- drug consultants”. ania, a new, energy-efficient heating • Continuation of sponsorship efforts. system was installed, and increased Environment warehouse efficiency and optimisation of palletisation result in better utilisation Competence development Royal Unibrew has always worked of the vehicle capacity. Moreover, the determinedly to limit the environmental average order size has been increased Royal Unibrew works in a targeted and impacts of the Company’s production. As by 7% in Lithuania and by 6% in Latvia structured manner to develop employee a result, Royal Unibrew is today ahead resulting in lower fuel consumption per competences. These efforts are further of its competitors when it comes to hectolitre distributed. described in the section ”Organisation resource-efficient beverages production. and Employees”. The Finnish Hartwall brewery initiated We will, however, continue our efforts an electricity saving project by replac- to reduce the environmental footprint ing approx 1,350 of 10,000 light sources Ethical values and of our production; efforts which are still guidelines primarily targeted at: ENERGY CONSUMPTION Royal Unibrew’s values and ethical guide- • Reduction of energy consumption. (Mega Joules per produced hectoliter) lines are included as an integrated part • Reduction of water consumption and of the employment relationship agreed of waste water discharge. 125 Hartwall fully with the individual employee. Our ethical • Reduction of wastage of raw materials consolidated in energy figures guidelines imply, among other things, and semi-manufactured products to 100 as of 2014 that Royal Unibrew does not tolerate the highest extent possible. 75 discrimination of its employees due to • Waste recycling and reduction of 50 gender, race, religion or political affiliation. resource consumption. 25 • CO2-neutral production of selected Royal Unibrew accedes to the principles products. 0 of human rights and labour standards in- • Food safety and quality. 2010 2011 2012 2013 2014 52 ANNUAL REPORT 2014 Royal Unibrew

with LED lights, which are four times water as well as waste water is used In 2014 the replacement of the distri- as energy-efficient as the existing light for heating purposes. bution vehicles in Denmark with new sources. Additional energy optimisation vehicles complying with the Euro 6 was made through optimisation of the requirements (the most eco-friendly production of PET bottles. Water consumption and lorries in the market) was commenced. waste water discharge This replacement is expected to continue Selected targets for 2015 in future years. The investment in Euro 2014 was to some extent affected by Water is an important constituent of Royal 6 vehicles is considered future proofing preparation for future, major invest- Unibrew’s business, and we are therefore in relation to the increasingly stringent ments in energy-conserving measures. always on the lookout for new methods to environmental requirements expected in These include: reduce our water consumption. Denmark. To Royal Unibrew, the replace- ment will imply annual savings in terms • During an in-depth process review at Total water consumption was reduced of diesel oil consumption. the Faxe brewery in Denmark, further by 2.1% to 3.3 hectolitres per hectolitre potential for reducing energy con- produced in 2014. Part of the reduction is In Finland the truck utilisation rate has sumption was identified in 2014. The attributable to the continued efforts of gone up significantly due to, among review will form the basis of future optimising cleaning processes, which has other things, optimisation of pallet pat- improvements. resulted in improved cleaning quality as terns and stacking heights. In Denmark • In Denmark the Faxe brewery will par- well as reduced resource consumption. the use of heavy goods vehicles has ticipate in two projects under ”Green increased, which reduces environmental Industrial Symbiosis”. One project on At the Faxe brewery in Denmark, the impacts. energy sharing among enterprises in crate washer was changed so as to Faxe and another on the use of non- recycle water from the bottle washing Latvia saw an upgrade of its machinery drinking water for cleaning of process machine, which reduces water as well as in that all diesel and gas trucks were equipment. energy consumption. replaced with electrical trucks, which

• In the Baltic countries heat recov- reduces CO2 emissions. ery systems will be installed at the At the Finnish Hartwall brewery, optimi- warehouses in 2015 in order to reduce sation of CIP processes (CIP: Cleaning In Moreover, wood pallets for logistics energy consumption for heating Place) as well as up to 20% reduction of purpose in Latvia are being replaced with purposes. beer and soft drinks wastage resulted in a plastic pallets whose life cycle is up to • The Baltic countries have a target of positive development in water and energy 10 times longer. This replacement will increasing order size by 10% to further consumption per hectolitre produced. continue in 2015. increase fuel efficiency. • The Finnish Lahti brewery will install, In 2014 waste water discharge was The Cido soft drinks factory in Latvia has among other things, a new filtering 2.2 hectolitres per hectolitre produced started bottling natural mineral water technology, bottling lines will be up- at group level, which is a 3.4% decline. in EcoForma containers which are up to graded and the MES (Manufacturing 20% lighter than the PET bottles previ- Execution System) will be renewed. ously used. This has reduced packaging • At the beginning of 2015, the Finn- Recycling and reduction of consumption by approx 75 tons of plas- ish Karijoki mineral water bottling consumption of resources tic, and emission from production has plant will install heat exchange on the been reduced by approx 225 tons. building heating system as well as in All production sites have strong, continu- processes so that heat from incoming ous focus on consumption, including recycling, of raw materials and other Selected targets for 2015 resources. Efforts are made to ensure WATER CONSUMPTION the best possible utilisation of the raw • All production sites will in 2015 (Hectoliter per produced hectoliter) materials and resources used in order to continue working at identifying and avoid unnecessary wastage. This applies implementing environmental improve- 5 to production as well as to the other ment measures. Targets and improve- 4 parts of the supply chain. ments will be realised locally at the 3 production sites to ensure the most In Denmark the Albani brewery estab- optimum implementation. Efforts are 2 lished recovery of heat from the wort focused on: 1 kettle in 2014. The heat is captured and • Optimum utilisation of raw materials 0 returned to the city’s district heating • Minimisation of wastage from all 2010 2011 2012 2013 2014 system to avoid energy waste. process levels ANNUAL REPORT 2014 Royal Unibrew 53

• Energy and water consumption • The Egekilde range to be extended Anti-corruption

reductions with more CO2 neutral varieties. • Increased rate of waste recycling Royal Unibrew works against all forms • Increased utilisation of transport of corruption, including extortion and capacity Food safety and quality bribery, and the Company’s activities • Indirect environmental impacts will be must always be in full compliance with sought reduced through choice of raw Royal Unibrew’s breweries have certifica- anti-corruption legislation irrespective of materials, eg by using thinner plastic tion under the international standards. the place of operation. materials for packaging purposes. The efforts within quality and food • Continuous efforts are directed at reduc- safety also comprise requirements from According to Royal Unibrew’s ethical ing consumption of materials for glass customers and licensors. Applicable HAC- guidelines, our employees are not al- bottles, cans and plastic containers. CP (Hazard Analysis and Critical Control lowed to offer or accept bribes or any • In Latvia efforts will continue to es- Points) rules have been implemented. improper payments for personal or tablish a return systems for beverage corporate gain. Disciplinary actions will containers, which is expected to be Brewery Certification be taken if an employee is involved in introduced in 2016/17. bribery. The staff in all sales areas are Cido, ISO22000 trained annually in this aspect. Latvia CO neutral production of Lacplesis, ISO22000 Selected targets for 2015 2 Latvia all Egekilde products • Our position on anti-corruption to be Kalnapilis, Forbereder ISO22000 Lithuania stated in all contexts, both internally Back in 2012 the carbon footprint of the Faxe, ISO22000/FSSC, ISO9001, in the supply chain and externally in Egekilde products was mapped through- Denmark ISO14001 the cooperation with customers and out the chain from raw materials to deliv- Albani, ISO22000/FSSC, ISO9001, suppliers. ery to Royal Unibrew’s customers, and the Denmark ISO14001 • Anti-corruption training of new sales Egekilde brand was launched as the first Lahti, ISO22000/FSSC, ISO9001, staff and follow-up training of other Finland ISO14001, OHSAS 18001 Danish CO2 neutral mineral water product. employees to be carried out. Karijoki, ISO22000/FSSC, ISO9001, FInland ISO14001, OHSAS 18001 CO2 neutrality is an ongoing process achieved by investing in environmen- The Albani, Lahti and Karijoki breweries Competition tally sound energy through UN-certified were FSSC certified (FSSC: Food Safety carbon credits and by means of plastic System Certification) in 2014. Royal Unibrew’s business should always containing up to 50% recycled material. be conducted in full compliance with ap- Furthermore, continuous efforts are The development and interest in food plicable competition regulation irrespec- directed at reducing energy and resource safety and quality among consum- tive of the place of operation. To ensure consumption with suppliers and within ers, customers and the media are on this, Royal Unibrew has implemented a production and logistics. the increase, which is also reflected in competition law compliance programme Royal Unibrew’s efforts in the area. Royal comprising a manual and guidelines as In 2014 the size of the screw caps on the Unibrew assesses on a current basis how well as regular training and follow-up, eg Egekilde bottles was reduced, which re- most appropriately to take responsibility through regular internal controls. duced the total weight of the container. for preventing risks and how to commu- Each unit has thus achieved a smaller nicate this. The priorities set are aligned Selected targets for 2015 carbon footprint. with those of industry associations and • Continuous monitoring and updating Royal Unibrew’s licensors. of compliance with competition law.

CO2 neutrality contributed towards • Training of new sales staff in existing Egekilde becoming the market leader in Selected targets for 2015 rules.

2014. Egekilde’s CO2 neutrality provides • ISO22000 certification of the Kalnapi- • Updating of other sales staff on exist- consumers with a climate-friendly pur- lis brewery in Lithuania is expected in ing rules. chasing option. Information on Egekilde’s H1 2015.

CO2 neutrality is updated at Royal Uni- • Quality assurance of the quality brew’s website. analysis process according to Heineken standards considered in line with Royal Selected targets for 2015 Unibrew’s wishes. • Updating of carbon footprint of pack- aging, containers and resources in the Egekilde production. 54 ANNUAL REPORT 2014 Royal Unibrew

Management’s Statement on the Annual Report

The Board of Directors and the Executive Financial Statements give a true and year, of the Parent Company’s financial Board have today considered and adopt- fair view of the financial position of the position and of the overall financial posi- ed the Annual Report of Royal Unibrew Group and the Parent Company at 31 De- tion of the enterprises comprised by the A/S for 1 January - 31 December 2014. cember 2014 as well as of the results of Consolidated Financial Statements, as the Group and Company operations and well as a description of the key risks and The Annual Report is prepared in ac- cash flows for the financial year 1 January uncertainties facing the Group and the cordance with International Financial – 31 December 2014. Parent Company. Reporting Standards as adopted by the EU and Danish disclosure requirements In our opinion, Management’s Review We recommend that the Annual Report be for annual reports of listed companies. gives a true and fair account of the devel- adopted at the Annual General Meeting. opment in the activities and financial cir- In our opinion, the Consolidated Finan- cumstances of the Group and the Parent cial Statements and the Parent Company Company, of results of operations for the

Faxe, 10 March 2015

Executive Board

Henrik Brandt Lars Jensen Johannes F.C.M. Savonije President & CEO CFO COO

Board of Directors

Kåre Schultz Walther Thygesen Chairman Deputy Chairman

Marting Alsø Ingrid Jonasson Blank Jørgen-Anker Ipsen

Kirsten Liisberg Søren Lorentzen Jens Due Olsen

Karsten Matthias Slotte Jais Valeur Hemming Van ANNUAL REPORT 2014 Royal Unibrew 55

Management’s Statement Independent Auditor’s on the Annual Report Report

To the Shareholders of and the Parent Company Financial State- Opinion Royal Unibrew A/S ments based on our audit. We conducted In our opinion, the Consolidated Financial our audit in accordance with International Statements and the Parent Company Report on Consolidated Financial Standards on Auditing and additional re- Financial Statements give a true and fair Statements and Parent Company quirements under Danish audit regulation. view of the financial position at 31 De- Financial Statements This requires that we comply with ethical cember 2014 of the Group and the Parent We have audited the Consolidated Financial requirements and plan and perform the au- Company and of the results of the Group Statements and the Parent Company Finan- dit to obtain reasonable assurance whether and Parent Company operations and cash cial Statements of Royal Unibrew A/S for the Consolidated Financial Statements and flows for the financial year 1 January - 31 the financial year 1 January - 31 December the Parent Company Financial Statements December 2014 in accordance with Inter- 2014, which comprise income statement, are free from material misstatement. national Financial Reporting Standards as statement of comprehensive income, bal- adopted by the EU and Danish disclosure ance sheet, statement of changes in equity, An audit involves performing procedures to requirements for listed companies. cash flow statement and notes, including obtain audit evidence about the amounts summary of significant accounting policies, and disclosures in the Consolidated Financial Statement on Management’s Review for the Group as well as for the Parent Statements and the Parent Company Finan- We have read Management’s Review in Company. The Consolidated Financial State- cial Statements. The procedures selected accordance with the Danish Financial ments and the Parent Company Financial depend on the auditor’s judgment, including Statements Act. We have not performed Statements are prepared in accordance with the assessment of the risks of material any procedures additional to the audit of International Financial Reporting Standards misstatement of the Consolidated Financial the Consolidated Financial Statements and as adopted by the EU and Danish disclosure Statements and the Parent Company Finan- the Parent Company Financial Statements. requirements for listed companies. cial Statements, whether due to fraud or On this basis, in our opinion, the informa- error. In making those risk assessments, the tion provided in Management’s Review is Management’s Responsibility auditor considers internal control relevant to consistent with the Consolidated Financial for the Consolidated Financial the Company’s preparation of Consolidated Statements and the Parent Company Statements and the Parent Financial Statements and Parent Company Financial Statements. Company Financial Statements Financial Statements that give a true and fair Management is responsible for the prepa- view in order to design audit procedures that ration of Consolidated Financial Statements are appropriate in the circumstances, but not and Parent Company Financial Statements for the purpose of expressing an opinion on Faxe, 10 March 2015 that give a true and fair view in accordance the effectiveness of the Company’s internal with International Financial Reporting control. An audit also includes evaluating Ernst & Young Standards as adopted by the EU and Danish the appropriateness of accounting policies Godkendt Revisionspartnerselskab disclosure requirements for listed compa- used and the reasonableness of accounting nies, and for such internal control as Man- estimates made by Management, as well as agement determines is necessary to enable evaluating the overall presentation of the the preparation of Consolidated Financial Consolidated Financial Statements and the Eskild N. Jakobsen Statements and Parent Company Financial Parent Company Financial Statements. State Authorised Public Accountant Statements that are free from material mis- statement, whether due to fraud or error. We believe that the audit evidence we have obtained is sufficient and appropriate Auditor’s Responsibility to provide a basis for our audit opinion. Niels-Jørgen Andersen and Basis of Opinion State Authorised Public Accountant Our responsibility is to express an opinion The audit has not resulted in any qualifica- on the Consolidated Financial Statements tion. 56 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Consolidated Financial Statements Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 57

Consolidated Income Statement for 1 January - 31 December

DKK ‘000 Note 2014 2013

Net revenue 4 6,055,898 4,480,998

Production costs 5, 6 -2,906,089 -2,195,788 Gross profit 3,149,809 2,285,210

Sales and distribution expenses 5, 6 -1,987,350 -1,448,530 Administrative expenses 5, 6 -336,241 -264,090 Other operating income 6 0 2,642 Other operating expenses 6, 25 0 -15,161 EBIT 826,218 560,071

Income after tax from investments in associates 13 34,808 33,552 Financial income 7 8,174 4,345 Financial expenses 8 -68,596 -49,685

Profitbefore tax 800,604 548,283

Tax on the profit for the year 9 -176,439 -68,707

Net profit for the year 624,165 479,576

Earnings per share (DKK) 18 56.5 45.9 Diluted earnings per share (DKK) 18 56.2 45.8

Consolidated Statement of Comprehensive Income for 1 January - 31 December

DKK ‘000 Note 2014 2013

Net profit for the year 624,165 479,576

Other comprehensive income Items that may be reclassified to the income statement Exchange adjustment of foreign group enterprises -14,184 -11,638 Value adjustment of hedging instruments, beginning of year 46,039 59,239 Value adjustment of hedging instruments, end of year -32,677 -46,039 Tax on other comprehensive income 9 -2,336 -4,105 Total -3,158 -2,543

Items that may not be reclassified to the income statement Revaluation of non-current assets 70,000 90,000 Tax on revaluation 9 -16,100 -19,000 Actuarian loss on pension schemes -2,791 Tax on actuarian loss on pension schemes 558 Total 51,667 71,000

Other comprehensive income after tax 10 48,509 68,457

Total comprehensive income 672,674 548,033 58 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Balance sheet

DKK ‘000 Note 2014 2013

Assets at 31 December

NON-CURRENT assets Intangible assets 11 2,941,247 2,944,042 Project development properties 12 238,439 290,539 Property, plant and equipment 12 2,331,310 2,418,402 Investments in associates 13 136,249 132,523 Other fixed asset investments 14 16,768 24,085 Non-current assets 5,664,013 5,809,591

CURRENT assets Inventories 15 312,041 330,459 Receivables 16 536,320 505,724 Corporation tax 9 0 11,754 Prepayments 17 20,011 23,022 Cash at bank and in hand 491,453 243,962 Current assets 1,359,825 1,114,921

Assets 7,023,838 6,924,512

Liabilities and Equity at 31 December

EQUITY Share capital 110,985 110,985 Other reserves 917,142 927,335 Retained earnings 1,446,170 1,094,657 Proposed dividend 344,054 0 Equity 18 2,818,351 2,132,977

Deferred tax 19 431,774 457,571 Mortgage debt 2 1,012,807 747,742 Credit institutions 2 859,108 1,097,291 Other payables 24,713 17,318 Non-current liabilities 2,328,402 2,319,922

Mortgage debt 2 164,480 14,159 Credit institutions 2 7,649 763,978 Trade payables 810,529 807,486 Corporation tax 9 22,156 0 Other payables 20 872,271 885,990 Current liabilities 1,877,085 2,471,613

Liabilities 21 4,205,487 4,791,535

Liabilities and equity 7,023,838 6,924,512 Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 59

Consolidated Cash Flow Statement for 1 January - 31 December

DKK ‘000 Note 2014 2013

Net profit for the year 624,165 479,576 Adjustments for non-cash operating items 22 515,677 255,576 1,139,842 735,152

Change in working capital: Receivables -29,751 -176 Inventories 18,533 34,518 Payables -22,967 56,587 Cash flow from operating activities before financial income and expenses 1,105,657 826,081

Financial income 1,669 4,345 Financial expenses -60,759 -59,635 Cash flow from operating activities 1,046,567 770,791

Corporation tax paid -151,126 -117,976 Cash flow from operating activities 895,441 652,815

Dividends received from subsidiaries and associates 24,346 20,474 Sale of property, plant and equipment 135,278 87,546 Corporation tax paid -24,500 -19,168 Purchase of property, plant and equipment -206,310 -143,394

Free cash flow 824,255 598,273

Business acquisitions 25 0 -2,775,124 Acquisition/sale of intangible assets and fixed asset investments 2,005 -7,023 Cash flow from investing activities -69,181 -2,836,689

Debt financing: Proceeds from increased debt 425,788 1,925,967 Repayment of debt -1,004,674 -5,832 Shareholders: Dividends paid to shareholders 0 -242,107 Acquisition of shares for treasury 0 -110,189 Proceeds from share issue 0 561,214 Sale of treasury shares 0 25,131 Cash flow from financing activities -578,886 2,154,184

Change in cash and cash equivalents 247,374 -29,690 Cash and cash equivalents at 1 January 243,962 273,775 Exchange adjustment 117 -123 Cash and cash equivalents at 31 December 491,453 243,962 60 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Consolidated Statement of Changes in Equity for 1 January - 31 December

Proposed Share Total dividend S share premium Revaluation Translation hedging other Retained for the DKK ‘000 capital account reserves reserve reserve reserves earnings year Total

Equity at 31 December 2013 110,985 855,839 136,505 -18,970 -46,039 927,335 1,094,657 0 2,132,977

Changes in equity in 2014 Profit for the year 0 624,165 624,165 Other comprehensive income 53,900 -13,666 13,362 53,596 -5,087 48,509 Revaluation reserves realised -63,789 -63,789 63,789 0 Total comprehensive income 0 0 -9,889 -13,666 13,362 -10,193 682,867 0 672,674 Proposed dividend 0 -377,349 377,349 0 Share-based payments 0 9,900 9,900 Tax, equity postings, shareholders 2,800 2,800 Total shareholders 0 0 0 0 0 0 -364,649 377,349 12,700 Total changes in equity in 2014 0 0 -9,889 -13,666 13,362 -10,193 318,218 377,349 685,374 Equity at 31 December 2014 110,985 855,839 126,616 -32,636 -32,677 917,142 1,412,875 377,349 2,818,351

The share capital at 31 December 2014 amounts to DKK 110,985,000 and is distributed on shares of DKK 10 each.

Equity at 31 December 2012 105,700 319,205 112,320 -5,719 -59,239 366,567 621,648 253,680 1,347,595

Changes in equity in 2013 Profit for the year 0 479,576 479,576 Other comprehensive income 71,000 -13,251 13,200 70,949 -2,492 68,457 Revaluation reserves realised -46,815 -46,815 46,815 0 Total comprehensive income 0 0 24,185 -13,251 13,200 24,134 523,899 0 548,033 Increase of capital 10,085 551,129 551,129 561,214 Dividends paid to shareholders 0 -242,107 -242,107 Dividend on treasury shares 0 11,573 -11,573 0 Acquisition of shares for treasury 0 -110,189 -110,189 Sale of treasury shares 0 25,131 25,131 Share-based payments 0 3,300 3,300 Reduction of capital -4,800 -14,495 -14,495 19,295 0 Total shareholders 5,285 536,634 0 0 0 536,634 -50,890 -253,680 237,349 Total changes in equity in 2013 5,285 536,634 24,185 -13,251 13,200 560,768 473,009 -253,680 785,382 Equity at 31 December 2013 110,985 855,839 136,505 -18,970 -46,039 927,335 1,094,657 0 2,132,977 Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 61

Notes to Consolidated Annual Report

Note PAGE

Descriptive notes 1 Basis of preparation 62-63 2 Financial risk management 64-67 3 Segment reporting 68

nOtes referring to Income Statement, balance Sheet and Cash Flow Statement 4 Net revenue 71 5 Staff expenses 72 6 Expenses broken down by type 73-74 7 Financial income 75 8 Financial expenses 75 9 Tax on the profit for the year 76 10 Comprehensive income 77 11 Intangible assets 77-80 12 Property, plant and equipment 80-83 13 Investments in associates 84-85 14 Other fixed asset investments 86 15 Inventories 87 16 Receivables 88-89 17 Prepayments 89 18 Equity and basis of earnings/cash flow per share 89-90 19 Deferred tax 91 20 Other current payables 92 21 Debt 93 22 Cash Flow Statement 93

Other notes 23 Contingent liabilities and security 94 24 Related parties 94 25 Sales and acquisitions of subsidiaries 95-96 62 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Annual Report

Note 1 bAsis of preparation of Consolidated Annual Report

BASIS OF PREPARATION New and amended standards and inter- Recognition and measurement Royal Unibrew A/S is a limited liability pretations that have taken effect Assets are recognised in the balance sheet company registered in Denmark. The Royal Unibrew has during the year imple- when it is probable that future economic Financial Statements for the period 1 mented all new IFRSs, amendments to benefits attributable to the asset will flow January - 31 December 2014 presented in existing standards and IFRICs adopted by to the Group, and the value of the asset the Annual Report comprise both Con- the EU which take effect for the financial can be measured reliably. solidated Financial Statements of Royal year 2014. These comprise: Unibrew A/S and its subsidiaries (Group) Liabilities are recognised in the balance and separate Parent Company Financial • IFRS 10, Consolidated Financial State- sheet when they are probable and can be Statements. ments measured reliably. Assets and liabilities • Amendment of IFRS 11, Joint Arrange- are initially measured at cost. Subse- The Financial Statements of Royal ments, to the effect that joint ventures quently, assets and liabilities are meas- Unibrew for 2014 have been prepared in are recognised at equity value ured as described for each item below. accordance with International Financial • Amendment of IFRS 12 concerning ad- Reporting Standards (IFRS) as adopted by ditional disclosures of interests in other Recognition and measurement take into the EU and additional Danish disclosure entities account losses and risks occurring before requirements for financial statements, the presentation of the Annual Report cf the reporting requirements for listed Standards and IFRICs adopted by the which confirm or invalidate affairs and con- companies laid down by NASDAQ OMX IASB and the EU which take effect for the ditions existing at the balance sheet date. Copenhagen A/S and the Danish Statutory financial year 2014 have not impacted the Order on Adoption of IFRS issued pursuant Annual Report other than by way of a few Revenues are recognised in the income to the Danish Financial Statements Act. additional disclosures. statement as earned. Furthermore, value adjustments of financial assets The Board of Directors and the Executive New and amended standards and inter- and liabilities measured at fair value or Board considered and adopted the Annual pretations that have not yet taken effect amortised cost are recognised. Moreover, Report of Royal Unibrew A/S for 2014 on The IASB has adopted a number of new all expenses incurred to achieve the earn- 10 March 2015. The Annual Report will be standards and amendments to existing ings for the year are recognised, including submitted for adoption by the sharehold- standards and interpretations which have depreciation, amortisation, impairment ers of Royal Unibrew A/S at the Annual not yet taken effect but will take effect in losses and provisions as well as reversals General Meeting on 28 April 2015. the financial year 2015 or later. The follow- due to changed accounting estimates in ing standard is relevant for Royal Unibrew: the income statement. The Financial Statements are presented in Danish kroner (DKK). • IFRS 9 “Financial instruments”, which Consolidated Financial Statements replaces IAS 39, changes the classifica- The Consolidated Financial Statements sIgnificant accounting policies tion and, thus, the measurement of comprise Royal Unibrew A/S (the Parent financial assets and liabilities. Company) and enterprises in which the This section describes the general ac- Parent Company exercises control (sub- counting policies applied and critical The above standard is not expected to sidiaries). accounting estimates made by Royal impact recognition and measurement, Unibrew. A detailed description of the only the extent of disclosures in the An- Enterprises in which the Group holds accounting policies applied and critical nual Report. between 20% and 50% of the votes and estimates made with respect to specific exercises significant influence but not reported amounts is presented in the Royal Unibrew expects to implement the control are classified as associates. relevant notes. The purpose of this is to above when they take effect. Where the create full transparency of the disclosed effective date of the EU differs from that The Consolidated Financial Statements are amounts by providing a total description of the IASB, Royal Unibrew will follow the prepared on the basis of Financial State- of the relevant accounting policy, the criti- effective date of the EU. ments of all group enterprises prepared cal estimates and the numerical informa- under the Group’s accounting policies by tion for each note. Moreover, the IASB has adopted a number combining accounting items of a uniform of other new and amended standards and nature. Elimination is made of intercom- The description of accounting policies in interpretations which are not relevant pany income and expenses, unrealised the notes constitutes part of the overall to the Company and are not expected to intercompany profits and losses, balances description of Royal Unibrew’s accounting impact future Financial Statements. and shareholdings. Comparative figures policies. are not adjusted for newly acquired, sold or wound-up enterprises. Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 63

Notes to Consolidated Annual Report

Note 1 bAsis of preparation of Consolidated Annual Report (continued)

Acquired enterprises are recognised as enterprises are recognised in other com- of the date of acquisition. Enterprises prehensive income. J udgements as an element in disposed of are recognised in the consoli- significant accounting policies dated income statement up until the date On recognition in the Consolidated of disposal. Financial Statements of associates with The calculation of carrying amounts of a functional currency that differs from certain assets and liabilities requires Translation policies the presentation currency of the Parent judgement as to how assets and liabilities For each of the reporting entities of the Company, the share of results for the year should be classified in the Financial State- Group, a functional currency is deter- is translated at average exchange rates, ments and how future events will affect mined. The functional currency is the and the share of equity including goodwill the value of these assets and liabilities currency of the primary economic environ- is translated at the exchange rates at the at the balance sheet date. In connection ment in which the reporting entity oper- balance sheet date. Exchange adjustments with the financial reporting for 2014, the ates. Transactions in other currencies than arising on the translation of the share of following judgments have been made the functional currency are transactions in the opening equity of foreign associates materially affecting the related items as foreign currencies. at exchange rates at the balance sheet described in relevant notes, see list below. date and on the translation of the share of Transactions in other currencies than the results for the year from average exchange C ritical accounting estimates functional currency are initially translated rates to exchange rates at the balance into Danish kroner at the exchange rates sheet date are recognised in other com- Management’s estimates are based on as- at the dates of transaction. Receivables, prehensive income and classified in equity sumptions which Management considers payables and other monetary items in for- under a separate translation reserve. reasonable but which are inherently uncer- eign currencies not settled at the balance tain and unpredictable. In connection with sheet date are translated at the exchange Critical accounting estimates the financial reporting for 2014, the follow- rates at the balance sheet date. Exchange and judgements ing critical estimates have been made as adjustments arising due to differences be- In connection with the preparation of desribed in the notes, see list below. tween the transaction date rates and the the Parent Company and Consolidated Fi- rates at the dates of payment or the rates nancial Statements, Management makes Accounting policies, judgements as an at the balance sheet date, respectively, estimates and judgements as to how element in significant accounting policies are recognised in financial income and ex- recognition and measurement of assets as well as critical accounting estimates are penses in the income statement. Property, and liabilities should take place based on described in the notes: plant and equipment and intangible as- the accounting policies applied. sets, inventories and other non-monetary assets purchased in foreign currencies and Note measured at historical cost are translated at the transaction date rates. Derivative financial instruments 2 Segment reporting 3 On recognition in the Consolidated Net revenue 4 Financial Statements of enterprises with Share-based payments 5 another functional currency than Danish Expenses 6 kroner (DKK), income statements are Financial income and expenses 8 translated at average annual exchange Corporation tax 9 rates. Balance sheet items are translated Intangible assets 11 at the exchange rates at the balance Property, plant and equipment 12 sheet date. Investments in associates 13 Other fixed asset investments 14 Exchange adjustments arising on the Inventories 15 translation of the opening balance sheet Receivables 16 items of foreign enterprises at exchange Prepayments 17 rates at the balance sheet date and on the Equity 18 translation of income statements from average exchange rates to exchange rates Deferred tax 19 at the balance sheet date are recognised Repurchase obligation packaging in circulation 20 in other comprehensive income. Similarly, Debt 21 exchange adjustments arising due to Cash Flow Statement 22 changes made directly in equity of foreign Business combinations 25 = Comments to the note 64 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Descriptive notes to Consolidated Annual Report

Note 2 financial risk management

The Group’s financial risks are managed raw materials in EUR and USD, including of DKK to EUR under Denmark’s monetary centrally according to the Treasury Policy purchases which involve an indirect USD policy is maintained. The objective is to approved by the Board of Directors, which risk on the part of the purchase price reduce negative effects on the Group’s includes guidelines for the handling of related to the raw material element. profit and cash flows. The risk is therefore currency, interest rate, liquidity and credit Purchases are in all materiality made in monitored and hedged continually. The risks. Commodity risks are also managed the currencies in which the Group has Group’s cash flows are primarily in EUR, under a commodity risk policy approved income, which results in a total reduction USD and GBP. The key currency risks are by the Board of Directors. of the currency risk. Furthermore, the related to GBP and USD. In the short term, translation of loans to/from subsidiaries a one percentage point increase in DKK Currency risk as well as the Group’s net debt is subject against the other currencies will affect Royal Unibrew is exposed to currency to currency risk where these are not the Group’s profit before tax negatively by risks through the geographic spread established in DKK. approx DKK 5 million. of the Group’s activities. This currency exposure is reflected through the activi- The above describes Royal Unibrew’s The total gross currency risk (before ties in the subsidiaries and the Parent transaction risks, which are hedged hedging) on the balance sheet items Company’s export activities where cash actively according to the Treasury Policy. was calculated at 31 December 2014. The flows are earned in foreign currencies, EUR is not hedged as the risk is immate- following table shows the sensitivity to and in connection with the purchase of rial provided that the existing 0.5% band a positive change in the cross rates at 31

Earnings Earnings impact impact Equity Equity before tax before tax impact impact DKK ‘000 change 2014 2013 2014 2013

EUR 0.1% -676 -1,362 2,586 1,925 USD 10% 2,008 1,332 2,763 1,986 GBP 10% 5 623 2,015 2,438

December 2014 with all other variables loans as well as interest payments on by approx +/- DKK 9 million (2013: approx. remaining unchanged. A negative change floating-rate liabilities. Debt is established +/- DKK 20 million), and the interest has a corresponding effect merely with only in currencies in which the Group has expenses in the Parent Company by +/- the sign reversed. commercial activities. DKK 4 million (2013: approx +/- DKK 19 million). 59% is fixed-interest through the Royal Unibrews translation risk relates pri- In Royal Unibrew’s assessment, the key Group’s hedging of interest rate risk with marily to Finland and Latvia (EUR) as well interest rate risk is related to the imme- a fixed-interest period of up to 3 years as Lithuania (LTL and as of 2015 EUR). The diate effect of interest rate changes on (2013: 4 years). translation risk related to Royal Unibrew’s the Group’s interest payment flows and investments in foreign subsidiaries is, as a Royal Unibrew focuses only secondarily Credit risks general rule, not hedged. on changes in the market value of the The Group’s credit risks relate primarily to debt. It is group policy to limit the effect trade receivables and counterparty risks. Financial risks such as the loss of competi- of interest rate changes on profit and cash tive strength due to long-term exchange flows while, within this framework, also The Group’s counterparty risks comprise rate changes are not hedged by financial achieving the lowest possible financing both commercial and financial counter- instruments but are included in Royal cost. At the end of 2014, mortgage debt party risk. The commercial counterparty Unibrew’s strategic considerations. amounted to DKK 1,157 million (2013: risk relates primarily to business agree- DKK 762 million) with an average term to ments with a built-in element of firm Interest rate risk maturity of 13 years (2013: 15 years). Bank rate/price. The financial counterparty Royal Unibrew’s interest rate risk is debt comprises committed bank credit risk relates to hedging agreements as substantially related to the Group’s loan facilities with an agreed term to maturity well as net bank deposits. The financial portfolio which is primarily denominated of up to 37 months (2013: 54 months). A counterparty risk is actively reduced by in DKK and EUR. Interest rate changes will one percentage point interest rate change distributing net bank deposits on banks in affect the market value of fixed-interest will affect the Group’s interest expenses Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 65

Descriptive notes to Consolidated Annual Report

Note 2 financial risk management (continued) accordance with the credit rating criteria products or to optimisation of selected For quite a number of years, Royal Uni- determined in the Treasury Policy. processes as well as maintenance. brew has recorded significant revenue in the Danish and Italian markets; with Royal Unibrew seeks to limit risks relating Commodity risks the acquisition of Hartwall, Finland has to credit granting to customers in export The commodity risk relates primarily to become the single key market. In 2014 markets through extensive use of insur- the purchasing of cans (aluminium), malt these markets accounted for 73% (2013: ance cover and other types of hedging of (barley), hops and packaging materials 63%) of consolidated revenue. Changes to payments. Where effective hedges cannot (cardboard) as well as energy. The com- consumption patterns or the competitive be established, Royal Unibrew has estab- modity risk is actively hedged commer- situation in these markets could therefore lished procedures for approval of such cially and financially in accordance with influence Royal Unibrew’s results materi- risks. There are no material credit risks on the Group’s Treasury Policy. ally. Changes to consumption patterns in individual customers. Credit risks relating the Group’s markets, eg changed views on to trade receivables are reduced by setting The objective of managing Royal Uni- alcohol consumption and consumption of off accrued bonus. At 31 December 2014 brew’s commodity risk is to achieve a soft drinks, may also affect Royal Uni- accrued bonus amounts to DKK 62 million smooth and time-differentiated effect brew’s development and results materially. (2013: DKK 89 million) set off against trade of commodity price increases, which receivables. is primarily achieved by entering into As a producer of alcoholic products, Royal fixed-price agreements with the relevant Unibrew is sensitive to changes in the The maximum credit risk corresponds to suppliers. As regards the Group’s purchase public alcohol policy - including indirect the carrying amount of the financial assets. of cans, financial contracts have been tax policies in the Group’s respective mar- made to hedge the risk of aluminium kets. For example, a change of the Danish Liquidity risks price increases. Exchange rate changes and Finnish indirect tax policy as com- It is group policy that its cash resources with respect to the settlement currency pared to those of neighbouring countries should be adequate to meet the expected of aluminium (USD) are an element of the could lead to a change of cross-border liquidity requirements in the current and overall currency risk management. trading patterns. This applies primarily to next financial year. The cash resources Germany and Estonia. may be bank deposits, short-term bonds The most significant part of purchases and unutilised credit facilities. for the next 12 months has, in accordance Legislative changes with respect to per- with Royal Unibrew’s policy, been hedged mitted types of containers and returning Capital management by entering into supplier agreements and of containers could also result in signifi- Royal Unibrew wants to ensure structural financial contracts. A +/-10% change in cant changes to consumption patterns. and financial flexibility as well as competi- the price of aluminium would have a P/L In Germany large parts of the Group’s tive power. To ensure this, continuous as- effect at group level of approx +/- DKK 6 products are sold in cans, whereas sales in sessment is made to determine the appro- million. Italy are primarily related to products in priate capital structure of Royal Unibrew. non-returnable glass bottles. At the end of 2014, it is assessed that the Other risks Group’s net interest-bearing debt should Market risks have in 2014 affected Royal The Group’s Insurance Guidelines deter- not exceed 2.5 times EBITDA and that the Unibrew’s results materially, which may mine the framework of covering risks equity ratio at year end should be 30%. also be the case in future years. Currently, in general insurance areas (buildings, the economic development in many of movables and trading losses) The risks are At the operational level, continuous ef- the Group’s markets and the resulting covered through insurance. The total risks forts are directed at optimising working consumer reluctance have affected volume are assessed by the Board of Directors on capital investments. Subject to adequate sales of the Group’s products, and thus also an annual basis and external specialists capacity, investments in production earnings, negatively. Furthermore, competi- review the breweries for relevant risks on facilities will be limited to replacement of tion has intensified resulting in limited pos- a regular basis. individual components, related to specific sibilities of realising sales price increases. 66 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Descriptive notes to Consolidated Annual Report

Note 2 financial risk management (continued)

Currency and interest rate risks and use of derivative financial instruments Derivative financial instruments entered into to hedge expected future transactions and qualifying as hedge accounting under IAS 39:

2014 2013

Deferred Deferred gain (+) gain (+) DKK ‘000 Period / loss (-) / loss (-)

Forward contracts: GBP 0 - 1 year -475 -169 SEK 0 - 1 year 0 -37 Total -475 -206

Raw material contracts -3,898 -6,122

2014 2013

Deferred Deferred gain (+) gain (+) DKK ‘000 Period / loss (-) / loss (-)

Interest rate swaps: Mortgage and bank loans 2015-2017 -28,304 -39,711

-32,677 -46,039

The derivative financial instruments applied in 2014 and 2013 may all be classified as level-2 instruments in the IFRS fair value hierarchy. The determined fair value of derivative financial instruments is based on observable market data such as yield curves or forward rates.

Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 67

Descriptive notes to Consolidated Annual Report

Note 2 financial risk management (continued)

Financial liabilities 31/12 2014

Maturity contractual maturity > 1 year maturity carrying DKK ‘000 cash flows < 1 year < 5 years > 5 years amount

Non-derivative financialinstruments: Financial debt, gross 2,044,044 173,010 993,102 877,932 2,044,044 Interest expenses 214,354 41,439 70,228 102,687 Trade payables and repayment obligation re packaging 810,529 810,529 810,529 Other payables 916,640 891,927 24,713 916,640 Total 3,985,567 1,916,905 1,088,043 980,619 3,771,213

The debt breaks down on the categories “debt at amortised cost” with DKK 3,738 million and “debt at fair value” with DKK 33 million. The fair value of the total debt is assessed to equal carrying amount.

31/12 2013

Maturity contractual maturity > 1 year maturity carrying DKK ‘000 cash flows < 1 year < 5 years > 5 years amount

Non-derivative financialinstruments: Financial debt, gross 2,623,170 778,137 967,790 877,243 2,623,170 Interest expenses 183,349 37,948 76,275 69,126 Trade payables and repayment obligation re packaging 807,486 807,486 807,486 Other payables 903,308 885,990 17,318 903,308 Total 4,517,313 2,509,561 1,061,383 946,369 4,333,964

The debt breaks down on the categories “debt at amortised cost” with DKK 4,288 million and “debt at fair value” with DKK 46 million. The fair value of the total debt is assessed to equal carrying amount.

Derivative financial instruments

Derivative financial instruments are initially recognised in the balance sheet at cost and are subsequently remeasured at their fair values. Positive and negative fair values of derivative financial instruments are included as other receivables and other payables, respectively

Changes in the fair values of derivative financial instruments that are designated and qualify as fair value hedges of a recognised asset or a recognised liability are recognised in the income statement as are any changes in the value of the hedged asset or the hedged liability.

Changes in the fair values of derivative financial instruments that are designated and qualify as hedges of future cash flows are recog- nised in other comprehensive income. Income and expenses relating to such hedging transactions are transferred from other compre- hensive income on realisation of the hedged item and are recognised in the same entry as the hedged item.

For derivative financial instruments which do not meet the criteria for hedge accounting, changes in fair values are recognised on a ­current basis in financial income and expenses in the income statement.

Derivative financial instruments

When entering into derivative financial instruments, Management exercises judgement to determine whether the instrument qualifies as effective hedging of recognised assets or liabilities or expected future cash flows. Derivative financial instruments recognised are tested for effectiveness at least quarterly, and any ineffectiveness identified is recognised in the income statement. 68 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Descriptive notes to Consolidated Annual Report

Note 3 segment reporting

The Group’s results, assets and liabilities break down as follows on segments:

Malt Western Beverages DKK ‘000 Europe Baltic Sea and Exports Unallocated Total

2014 Net revenue 2,674.6 2,974.8 406.5 6,055.9 Earnings before interest and tax (EBIT) 483.7 295.3 83.9 -36.7 826.2 Net financials -0.7 -15.4 -0.2 -44.1 -60.4 Share of income from associates 34.8 34.8 Profit/loss before tax 517.8 279.9 83.7 -80.8 800.6 Tax -176.4 -176.4 Profit/loss for the year 517.8 279.9 83.7 -257.2 624.2

Assets* 1,552.6 5,064.3 32.3 238.4 6,887.6 Associates 136.2 136.2 Total assets 1,688.8 5,064.3 32.3 238.4 7,023.8

Purchase of property, plant and equipment 133.6 72.3 0.4 206.3

Liabilities** 883.9 1,816.7 4.7 1,500.2 4,205.5

Sales (million hectolitres) 3.7 4.7 0.6 9.0

* Unallocated assets include project development properties. ** Unallocated liabilities include the Parent Company’s interest-bearing debt..

Malt Western Beverages DKK ‘000 Europe Baltic Sea and Exports Unallocated Total

2013 Net revenue 2,650.3 1,450.2 380.5 4,481.0 Earnings before interest and tax (EBIT) 424.0 101.6 81.3 -46.8 560.1 Net financials -0.2 -9.9 -0.4 -34.8 -45.3 Share of income from associates 33.5 33.5 Profit/loss before tax 457.3 91.7 80.9 -81.6 548.3 Tax -68.7 -68.7 Profit/loss for the year 457.3 91.7 80.9 -150.3 479.6

Assets* 1,472.5 4,986.2 42.8 290.5 6,792.0 Associates 132.5 132.5 Total assets 1,605.0 4,986.2 42.8 290.5 6,924.5

Purchase of property, plant and equipment 111.9 31.5 143.4 Purchase of property, plant and equipment on acquisition 1,245.4 1,245.4 Purchase of intangible assets on acquisitiion 2,582.9 2,582.9

Liabilities** 898.0 1,371.4 6.2 2,515.9 4,791.5

Sales (million hectolitres) 3.6 2.8 0.6 7.0

* Unallocated assets include project development properties. ** Unallocated liabilities include the Parent Company’s interest-bearing debt. Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 69

Descriptive notes to Consolidated Annual Report

Note 3 segment reporting (continued)

Geographically, revenue and non-current assets break down as follows:

2014 2013

Net Non-current Net Non-current DKK ‘000 revenue assets revenue assets

Denmark 1,492.8 1,101.8 1,450.8 905.8 Finland 2,320.5 3,829.0 786.6 3,800.1 Italy 606.6 26.4 Germany 564.9 Other countries 2,242.6 494.8 1,072.1 786.7 Unallocated 238.4 290.5 Total 6,055.9 5,664.0 4,481.0 5,809.5

The geographic breakdown is based on the geographic location of the Group’s external customers and comprises countries that ­individually account for more than 10% of the Group’s net revenue as well as the country in which the Group is headquartered. ­Consequently no information for 2014 is given on Italy and Germany.

No single customer accounts for revenue in excess of 10% of the Group’s net revenue.

70 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Descriptive notes to Consolidated Annual Report

Note 3 segment reporting (continued)

Segment reporting 2010 - 2014 The Group’s activities break down as follows on segments:

Malt Western Beverages DKK ‘000 Europe Baltic Sea and Exports Unallocated Total

2014 Net revenue 2,674.6 2,974.8 406.5 6,055.9 Operating profit/loss 483.7 295.3 83.9 -36.7 826.2 Assets 1,688.8 5,064.3 32.3 238.4 7,023.8 Liabilities 883.9 1,816.7 4.7 1,500.2 4,205.5 Sales (million hectolitres) 3.7 4.7 0.6 9.0

2013 Net revenue 2,650.3 1,450.2 380.5 4,481.0 Operating profit/loss 424.0 101.6 81.3 -46.8 560.1 Assets 1,605.0 4,986.2 42.8 290.5 6,924.5 Liabilities 898.0 1,371.4 6.2 2,515.9 4,791.5 Sales (million hectolitres) 3.6 2.8 0.6 7.0

2012 Net revenue 2,429.9 585.1 415.0 3,430.0 Operating profit/loss 408.2 27.3 83.9 -34.4 485.0 Assets 1,974.9 559.4 37.5 276.3 2,848.1 Liabilities 791.4 106.1 8.7 594.3 1,500.5 Sales (million hectolitres) 3.3 1.6 0.5 5.4

2011 Net revenue 2,410.1 629.1 391.4 3,430.6 Operating profit/loss 405.0 45.1 53.3 -29.2 474.2 Assets 1,688.1 701.0 89.7 411.5 2,890.3 Liabilities 790.2 133.9 33.3 611.7 1,569.1 Sales (million hectolitres) 3.3 2.0 0.4 5.7

2010 Net revenue 2,424.5 941.7 409.2 3,775.4 Operating profit/loss 365.3 45.9 48.2 -42.5 416.9 Assets 1,503.3 996.9 150.2 406.4 3,056.8 Liabilities 742.8 217.6 38.9 770.0 1,769.3 Sales (million hectolitres) 3.2 2.9 0.5 6.6

segMENT REPORTING

The Group’s business segment is beer and soft drinks sales. Reporting on the business segment is by geographical markets. Segment reporting is based on the Group’s returns and risks and its internal financial reporting system.

Items included in net profit for the year, including income from investments in associates and financial income and expenses, are ­allocated to the extent that the items are directly or indirectly attributable to the markets.

Items allocated both by direct and indirect computation comprise “production costs” and “administrative expenses”, which are allo- cated by indirect computation based on allocation keys determined on the basis of the market’s drain on key resources. Administrative expenses incurred in the group functions of the Parent Company are partly allocated. Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 71

Descriptive notes to Consolidated Annual Report

Note 3 segment reporting (continued)

Non-current assets comprise the non-current assets that are directly or indirectly used in connection with activities in the markets.

Segment liabilities comprise liabilities derived from activities in the market, including provisions, trade payables, VAT, excise duties and other payables.

The segment names were changed in 2014, while the activities included are unchanged:

New Previous Western Europe Western Europe Baltic Sea North East Europe Malt beverages and Exports Malt Beverages

Note 4 net revenue

DKK ‘000 2014 2013

Net revenue 6,055,898 4,480,998

net revenue

Net revenue from the sale of goods and services is recognised in the income statement if delivery has been made before year end, and if revenues can be measured reliably and are expected to be received.

Net revenue is measured exclusive of VAT and net of discounts as well as excise duties on beer and mineral water. All types of discounts granted are recognised in net revenue. 72 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Income Statement

Note 5 Staff expenses

Staff expenses are included in production costs, sales and distribution expenses as well as administrative expenses and break down as follows:

DKK ‘000 2014 2013

Salaries to Executive Board 12,850 12,010 Ordinary bonus scheme for Executive Board 6,038 5,658 Long-term bonus scheme for Executive Board 2,108 6,981 Share-based payments to Executive Board (restricted shares) 9,900 3,300 Remuneration of Executive Board 30,896 27,949 Remuneration of Board of Directors 3,229 2,875 34,125 30,824

Wages and salaries 760,610 590,374 Contributions to pension schemes 56,331 53,207 816,941 643,581

Other social security expenses 7,839 8,193 Other staff expenses 25,186 27,042 Total 884,091 709,640

Average number of employees 2,374 1,935

sHare-based payments

The share-based payments to the Executive Board comprise a maximum of 60,000 restricted (conditional) shares allotted for no con- sideration vesting in the period 1 September 2013 to 31 December 2016.

The receipt of shares is conditional on continued employment in the period up until the Board of Directors’ adoption of the Annual Report for 2016, and on the employee not having handed in notice. The number of shares depends on the extent to which the EBIT and free cash flow targets for the financial years 2013-2016 defined by the Board of Directors are achieved.

sHare-based payments

The Group only has schemes classified as equity-settled schemes. Restricted shares are measured at fair value at the time of granting and are recognised in staff expenses in the income statement over the vesting period. The counter item is recognised directly in equity.

At the initial recognition of the restricted shares, the number of shares expected to vest is estimated. Subsequently, the estimate of the number of restricted shares is revised so that the total recognition is based on the actual number of shares allotted.

sHare-based payments

The fair value of the expected allotment of restricted shares is estimated under the Black-Scholes model. In determining fair value, condi- tions and terms related to the restricted shares are taken into account.

The market value at the beginning of the vesting period has been calculated under the Black-Scholes model at DKK 550 per share, cor- responding to DKK 33 million for the maximum number of shares. The market value is charged to the income statement on a straight-line basis over the vesting period, corresponding to the rate at which the conditions for the allotment of the shares are expected to be met. The conditions are expected to be fully met at 31 December 2014 (2013: 100%). Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 73

Notes to Consolidated Income Statement

Note 6 expenses broken down by type

DKK ‘000 2014 2013

The aggregated Production costs 2,906,089 2,195,788 Sales and distribution expenses 1,987,350 1,448,530 Administrative expenses 336,241 264,090 Total 5,229,680 3,908,408 broken down by type as follows: Raw materials and consumables 2,304,645 1,777,950 Wages, salaries and other staff expenses 884,091 709,640 Operating and maintenance expenses 288,580 203,274 Distribution expenses and carriage 502,313 276,552 Sales and marketing expenses 749,535 617,801 Bad trade debts 11,399 8,004 Officesupplies etc 185,393 143,407 Depreciation and profit from sale of property, plant and equipment 303,724 171,780 Total 5,229,680 3,908,408

Total depreciation and impairment losses as well as profit from sale of property, plant and equipment are included in the following items in the income statement:

DKK ‘000 2014 2013

Production costs 195,182 104,358 Sales and distribution expenses 84,712 54,039 Administrative expenses 23,830 13,383 Total 303,724 171,780

Fee to auditors

DKK ‘000 2014 2013

Fee for the audit of the Annual Report: Ernst & Young 2,060 1,988 Total 2,060 1,988

Ernst & Young fee for non-audit services: Tax assistance 146 221 Other assurance assistance 50 277 Other assistance 576 717 Total 772 1,215

74 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Income Statement

Note 6 expenses broken down by type (continued)

Expenses

Production costs Production costs comprise direct and indirect expenses incurred to manufacture the finished goods representing revenue for the year, including expenses for raw materials and consumables purchases, salaries and wages, renting and leasing as well as depreciation of and impairment losses on plant and machinery.

Production costs also include development costs that do not meet the criteria for capitalisation.

Sales and distribution expenses Sales and distribution expenses comprise expenses for distribution and sales campaigns relating to goods sold during the year, ­including expenses for sales personnel, marketing, depreciation and amortisation as well as losses on trade receivables.

Administrative expenses Administrative expenses comprise expenses for management and administration of the Group, including expenses for administrative personnel, management, office supplies, insurance, depreciation and amortisation.

Other operating income and other operating expenses Other operating income and other operating expenses comprise income or expenses of a secondary nature compared to the core ­activities of the Company, including renting of property, plant and equipment, acquisition costs, etc.

Leases

When entering into leases, Management makes a judgement based on the following factors in order to identify whether the leases should be classified as finance or operating leases.

• The characteristics of the assets to which the leases relate • The term of the leases as compared to the useful lives of the assets • The amount of the minimum lease payments over the term of the leases • Matters concerning purchase obligations and ownership of the assets in question

At this time, Royal Unibrew has both finance and operating leases. Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 75

Notes to Consolidated Income Statement

Note 7 financial income

DKK ‘000 2014 2013

Interest income Cash at bank and in hand 62 242 Trade receivables 1,507 318 Other financial income 1,482 2,614

Exchange adjustments Cash at bank and in hand and external loans 805 Trade payables 461 363 Trade receivables 3,296 Intercompany loans 561 Forward contracts 808 Total 8,174 4,345

Note 8 Financial expenses

DKK ‘000 2014 2013

Interest expenses Mortgage credit institutes 33,849 25,457 Credit institutions 33,033 12,121 Other payables 225

Exchange adjustments Cash at bank and in hand and external loans 989 Trade receivables 1,698 Forward contracts 1,585 507 Other financialexpenses 129 8,688 Total 68,596 49,685

Financial income and expenses

Financial income and financial expenses comprise interest, costs of factoring, capital gains and losses on investments, balances and transactions in foreign currencies, amortisation of financial assets and liabilities, fair value adjustments of derivative financial instru- ments that do not qualify as hedge accounting as well as extra payments and repayment under the on-account taxation scheme, etc. 76 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Income Statement

Note 9 tAx on the profit for the year

DKK ‘000 2014 2013

Tax on the taxable income for the year 208,968 133,056 Adjustment of previous year 2,580 -443 Adjustment of deferred tax -20,031 -40,801 Total 191,517 91,812 which breaks down as follows: Tax on profit for the year 176,439 68,707 Tax on other comprehensive income 17,878 23,105 Tax on equity postings, shareholders -2,800 Total 191,517 91,812

Current Danish tax rate 24.5 25.0 Adjustment of previous year 0.3 Income from associates after tax -1.0 -1.5 Effect on tax rate of permanent differences 0.1 4.9 Changes to tax rates -0.6 -11.8 Differences in effective tax rates of foreign subsidiaries -1.3 -4.1 Effectivetax rate 22.0 12.5

tax on the profit for the year

Tax for the year consists of current tax for the year and movements in deferred tax for the year. The tax attributable to the profit for the year is recognised in the income statement, whereas the tax attributable to equity entries is recognised directly in equity.

The Parent Company is jointly taxed with its Danish subsidiaries. The Danish current tax for the year is allocated to the jointly taxed Danish enterprises in proportion to their taxable incomes (full allocation with credit for tax losses).

Corporation tax

Current tax liabilities are recognised in the balance sheet as calculated tax on the expected taxable income for the year adjusted for tax on taxable incomes for previous years and for tax paid on account. Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 77

Notes to Consolidated Income Statement

Note 10 comprehensive income

DKK ‘000 2014 2013

Realised hedging transactions are included in the income statement as follows: Net revenue includes currency hedges of -4,697 1,065 Production costs include foreign currency and commodity hedges of 764 -9,437 Financial income and expenses include currency, commodity and interest rate hedges of -15,941 -18,832 Total -19,874 -27,204

Note 11 intangible assets

Distribution Customer DKK ‘000 goodwill Trademarks rights relations Total

Cost at 1 January 2014 1,430,378 1,239,438 229,776 67,747 2,967,339 Exchange adjustment -2,550 -2,659 -501 -152 -5,862 Additions on acquisition, cf. note 25 24,000 24,000 Additions 5,223 5,223 Cost at 31 December 2014 1,451,828 1,236,779 234,498 67,595 2,990,700

Amortisation and impairment losses at 1 January 2014 0 -3,336 -15,184 -4,777 -23,297 Exchange adjustment -102 139 33 70 Amortisation for the year -12,685 -13,541 -26,226 Amortisation and impairment losses at December 2014 0 -3,438 -27,730 -18,285 -49,453

Carrying amount at 31 December 2014 1,451,828 1,233,341 206,768 49,310 2,941,247

Cost at 1 January 2013 244,882 127,485 11,831 384,198 Exchange adjustment 64 130 41 13 248 Additions on acquisition, cf. note 25 1,185,432 1,111,823 217,904 67,734 2,582,893 Cost at 31 December 2013 1,430,378 1,239,438 229,776 67,747 2,967,339

Amortisation and impairment losses at 1 January 2013 0 -3,416 -10,159 -13,575 Exchange adjustment 80 -1 -1 78 Amortisation for the year -5,024 -4,776 -9,800 Amortisation and impairment losses at 31 December 2013 0 -3,336 -15,184 -4,777 -23,297

Carrying amount at 31 December 2013 1,430,378 1,236,102 214,592 62,970 2,944,042

gOODWIll and trademarks

Goodwill and trademarks with indefinite useful lives relating to Hartwall (Finland) and to Cido and Kalnapilis (the Baltic countries) each represents more than 10% of the total value of goodwill and trademarks.

Goodwill

Goodwill is initially recognised in the balance sheet at cost as described under “Business combinations” in note 25. Subsequently, ­goodwill is measured at cost less accumulated impairment losses. 78 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Balance Sheet

Note 11 intangible assets (continued)

The carrying amount of goodwill is allocated to the Group’s cash-generating units at the time of acquisition. The determination of cash-generating units is based on management structure and internal financial management.

tRademarks, distribution rights and customer relations

Trademarks, distribution rights and customer relations are initially recognised in the balance sheet at cost. Subsequently, they are measured at cost less accumulated amortisation and less any accumulated impairment losses. Trademarks, distribution rights and customer relations are amortised on a straight-line basis over their estimated useful lives.

Trademarks are not amortised as they are all well-established, old and profitable trademarks which customers are expected to continue demanding unabatedly, other things being equal, and which Management is not planning to stop selling and marketing.

Distribution rights are amortised on a straight-line basis over their estimated useful lives, maximum 20 years. Customer relations are amortised on a straigt-line basis over their estimated useful lives, maximum 5 years.

Goodwill and trademarks with indefinite useful lives are, however, not amortised but are tested annually for impairment. It is the Group’s strategy to maintain trademarks and their value.

Impairment test of goodwill and trademarks The impairment test in 2014 as in 2014 did not give rise to recognising any impairment losses.

The carrying amount of goodwill and trademarks with indefinite useful lives at 31 December is related to the cash-generating opera- tional units and breaks down as follows:

DKK ‘000 Goodwill Trademarks Total Share

2014 Western Europe 80,645 2,990 83,635 3% Baltic Sea* 1,363,431 1,230,351 2,593,782 97% Malt Beverages and Exports 7,752 7,752 0% Total 1,451,828 1,233,341 2,685,169 100%

* most of the values relates to Finland

The recoverable amount is based on value in use, which is calculated by means of expected net cash flows on the basis of budgets and forecasts for 2015-2017 approved by Management as well as estimated market driven discount rates and growth rates.

Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 79

Notes to Consolidated Balance Sheet

Note 11 intangible assets (continued)

Only limited revenue growth is expected in the medium term as several of Royal Unibrew’s markets are generally seeing minor struc- tural declines in the total beverage market. The Baltic Sea segment is expected to see continuously declining consumption in Finland and stable consumption in the Baltic countries. Through increased focus on exploiting commercial opportunities and innovation, Royal Unibrew expects to be able to maintain its revenue at the current level in Finland and to realise limited revenue growth in the Baltic countries. Gross margins are assumed to remain stable at the current level through continued focus on continuous efficiency enhance- ment. The key assumptions underlying the calculation of recoverable amount are as indicated below.

Malt beverages Western Europe Baltic Sea and Exports

Growth rate 2018-2021 1% 0-4% 0% Growth rate on terminal value 1% 1% 2% Discount rate (WACC) 6.5% 6,6-8,6% 15.5%

The forecasted results for 2015-2017 approved by Management are based on previously achieved results and expected market develop- ments. The average growth rates applied are in accordance with Management’s expectations taking into account industry conditions in the individual markets. The discount rates applied are before tax and reflect current specific risks in the individual market. The assump- tions applied by Management are inherently subject to uncertainty and unpredictability. Reasonably probable changes will not lead to recognition of impairment losses.

DKK ‘000 Goodwill Trademarks Total Share

2013 Western Europe 80,645 2,990 83,635 3% North East Europe (from 2014: Baltic Sea) 1,342,466 1,233,112 2,575,578 97% Malt Beverages (from 2014: Malt Beverages and Exports) 7,267 7,267 0% Total 1,430,378 1,236,102 2,666,480 100%

The key assumptions underlying the calculation of recoverable amount in 2013 were: Malt beverages Western Europe Baltic Sea and Exports

Growth rate 2017-2020 1% 0-4% 2% Growth rate on terminal value 1% 1% 2% Discount rate (WACC) 6.0% 5.7-9.5% 15.5%

The forecasted results approved by Management are based on previously achieved results and expected market developments. The average growth rates applied are in accordance with Management’s expectations taking into account industry conditions in the individual markets. The discount rates applied are before tax and reflect current specific risks in the individual market. The assumptions applied by Management are inherently subject to uncertainty and unpredictability. Reasonably probable changes will not lead to recognition of impairment losses.

Impairment

The carrying amounts of intangible assets and property, plant and equipment are reviewed on an annual basis to determine whether impairment has incurred other than that expressed by normal amortisation and depreciation. If so, the asset is written down to the higher of net selling price and value in use. Goodwill and other assets for which a value in use cannot be determined as the asset does not on an individual basis generate future cash flows are reviewed for impairment together with the group of assets (cash-generating units) to which they are attributable.

The carrying amount of goodwill and trademarks with indefinite useful lives is tested for impairment at least on an annual basis, together with the other non-current assets of the cash-generating unit to which goodwill has been allocated, and is written down to recoverable amount in the income statement if the carrying amount exceeds the recoverable amount. 80 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Balance Sheet

Note 11 intangible assets (continued)

The carrying amount of financial assets measured at cost or amortised cost is written down for impairment if, due to changed expected net payments, the net present value is lower than the carrying amount.

Intangible assets

In relation to trademarks, Management makes an annual judgement to determine whether the current market situation has reduced the value or affected the useful life of the trademarks, including whether past estimates of indefinite useful lives may be maintained.

An annual impairment test is made of the values recognised in the Financial Statements of goodwill and trademarks assessed to have in- definite lives which are therefore not amortised. For a description of the discount rates and growth rates applied in connection with the impairment test of goodwill and trademarks as well as other assumptions of the impairment test, reference is made to the above note.

Note 12 property, plant and equipment

Other Other fixtures, Property, property, Project and fittings, plant and plant and development Land and Plant and tools and equipment equipment DKK ‘000 properties buildings machinery equipment in progress Total

Cost at 1 January 2014 145,703 1,701,646 2,018,783 645,866 38,164 4,404,459 Exchange adjustment -2,320 -1,904 -416 -25 -4,665 Additions 2,905 21,088 59,993 78,456 43,868 203,405 Disposals -54,073 -2,780 -8,930 -40,830 -52.540 Transfers for the year 2,502 14,625 19,322 -36,449 0 Cost at 31 December 2014 94,535 1,720,136 2,082,567 702,398 45,558 4,550,659

Depreciation and impairment losses at 1 January 2014 144,836 -440,141 -1,138,516 -407,400 0 -1,986,057 Exchange adjustment 387 1,054 500 1,941 Depreciation for the year -65,096 -122,394 -91,003 -278,493 Revaluations for the year 70,000 Reversal of depreciation and impairment of assets sold and discontinued -70,932 791 7,961 34,508 43,260 Depreciation and impairment losses at 31 December 2014 143,904 -504,059 -1,251,895 -463,395 0 -2,219,349

Carrying amount at 31 December 2014 238,439 1,216,077 830,672 239,003 45,558 2,331,310

Finance lease assets included above Cost 65,140 Depreciation and impairment losses -9,566 Carrying amount at 31 December 2014 55,574 55,574

Land and buildings at a carrying amount of DKK 1,017 million have been provided as security for mortgage debt of DKK 1,161 million Leased assets at a carrying amount of DKK 55.6 million have been provided as security for lease commitments totalling DKK 60.1 million.

Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 81

Notes to Consolidated Balance Sheet

Note 12 property, plant and equipment (continued)

Other Other fixtures, Property, property, Project and fittings, plant and plant and development Land and Plant and tools and equipment equipment DKK ‘000 properties buildings machinery equipment in progress Total

Cost at 1 January 2013 158,842 968,483 1,512,170 540,601 67,531 3,088,785 Exchange adjustment 312 340 -4 3 651 Additions 2,901 2,882 57,271 44,432 35,908 140,493 Additions on acquisition 720,988 402,974 112,487 8,901 1,245,350 Disposals -16,040 -52 -14,243 -56,525 -70,820 Transfers for the year 9,033 60,271 4,875 -74,179 0 Cost at 31 December 2013 145,703 1,701,646 2,018,783 645,866 38,164 4,404,459

Depreciation and impairment losses at 1 January 2013 117,496 -409,283 -1,078,801 -397,698 0 -1,885,782 Exchange adjustment -9 -42 -224 -275 Depreciation for the year -30,901 -71,219 -58,523 -160,643 Revaluations for the year 90,000 Reversal of depreciation and impairment of assets sold and discontinued -62,660 52 11,546 49,045 60,643 Depreciation and impairment losses at 31 December 2013 144,836 -440,141 -1,138,516 -407,400 0 -1,986,057

Carrying amount at 31 December 2013 290,539 1,261,505 880,267 238,466 38,164 2,418,402

Finance lease assets included above Cost 117,774 Depreciation and impairment losses -4,430 Carrying amount at 31 December 2013 113,344 113,344

Land and buildings at a carrying amount of DKK 656.5 million have been provided as security for mortgage debt of DKK 761.9 million Leased assets at a carrying amount of DKK 113.3 million have been provided as security for lease commitments totalling DKK 109 million.

Project development properties (brewery site in Aarhus)

In 2011 the Company entered into a cooperation agreement based on an option model under which the purchaser may acquire the brewery site piece by piece in the period to the end of 2016. It remains Management’s assessment as stated in connection with the presentation of the Financial Statements for the period 1 January - 31 December 2013 that the potential cash flow under the said co- operation agreement provides the best basis for estimating the fair value of the brewery site. Building rights for 85,475 square metres of the total 140,000 square metres of building rights at the brewery site were sold in 2012-2014 at carrying amount. In 2008, 2013 and 2014 the carrying amount was revalued by DKK 240 million, DKK 90 million and DKK 70 million, respectively. The revaluation is less deferred tax recognised in revaluation reserves in equity. The carrying amount of the remaining 54,525 square metres of building rights amounts to DKK 239 million at 31 December 2014 and does not differ materially from the currently estimated fair value. The purchaser has notified Royal Unibrew that he wishes to acquire building rights for additionally 18,900 square metres. The acquisition will be made at a value corresponding to the carrying amount at 31 December 2014. 82 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Balance Sheet

Note 12 property, plant and equipment (continued)

Property, plant and equipment

Land and buildings, plant and machinery and other fixtures and fittings, tools and equipment are measured at cost less accumulated depreciation and less any accumulated impairment losses. Borrowing costs relating to the acquisition of property, plant and equipment are capitalised.

Depreciation is calculated on a straight-line basis over the useful lives of the assets.

Profits and losses on the disposal of property, plant and equipment are calculated as the difference between the sales sum less the -ex penses necessary to make the sale and the carrying amount at the time of sale. Profits or losses are recognised in the income statement as an adjustment to depreciation in production costs, sales or distribution expenses or administrative expenses, respectively.

Property, plant and equipment

The expected useful lives of the assets remain unchanged from 2013 and are as follows:

Buildings and installations, 25-40 years Leasehold improvements, over the term of the lease, max. 10 years Plant and machinery, 5-15 years Other fixtures and fittings, tools and equipment, 3-8 years Returnable packaging, 3-10 years

Management updates its estimate of the useful lives of property, plant and equipment annually.

Leases

For accounting purposes, lease obligations are classified as either finance or operating lease obligations. A lease is classified as a finance lease if it substantially transfers the risks and rewards of ownership of the leased asset. All other leases are classified as operat- ing leases.

Payments made under operating leases are recognised in the income statement on a straight-line basis over the lease term.

Project development properties

Project development properties are measured at revalued amount based on Management’s updated estimate.

If the carrying amount is increased because it differs materially from fair value, the increase is recognised directly in equity in revalu- ation reserves. The increase is, however, recognised in the income statement if it offsets an impairment previously recognised in the income statement as a result of revaluation of the same property.

If the carrying amount is impaired as a result of revaluation, the impairment is recognised in the income statement. The impairment is, however, recognised directly in equity in revaluation reserves if a reserve has been made for the property in question under revaluation reserves.

P roject development properties

With a view to ensuring adequate disclosure of the value of the brewery site in Aarhus, Management has chosen to apply the exemp- tion provision of IAS 16 which allows separate recognition of an item of property, plant and equipment as well as revaluation of the asset to fair value. Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 83

Notes to Consolidated Balance Sheet

Note 12 property, plant and equipment (continued)

Recognition of project development properties

As previously, in connection with estimating whether project development properties should be revalued, Management has also in 2014 based its estimate of the fair value on a calculation of the present value of the cash flows expected to be generated under the agreements entered into.

The key elements of the calculation of the fair value of the brewery site are estimated selling prices and milestone dates under the cooperation agreement, estimated costs up until the date of sale (property taxes, project and selling costs) and the discount rate. The fair value measurement is classified in level 3 of the fair value hierarchy. At 31 December 2014 Management estimates the fair value per square metre of building rights at nominally approx DKK 5,000 (2013: DKK 4,200) based on average sales proceeds (selling price less costs), an average vacancy period of 1-2 years (2013: 2-3 years) and a discount rate of 6.5% (2013: 6.5%) for the 54,525 square metres of building rights comprised by the unsold part of the site according to the existing local plan

As the agreement is an option-based agreement, the disposal of the brewery site, including the related timing, is subject to uncertain- ty, and the value at the time of disposal may differ materially from the currently estimated fair value, which does not differ materially from carrying amount at 31 December 2014.

The currently estimated fair value changes by approx DKK 5 million (2013: DKK 6 million) per DKK 100 change of the square metre price, by approx DKK 10 million (2013: DKK 13 million) per yearly change of the average vacancy period and by approx DKK 3 million (2013: DKK 5 million) per percentage point change of the discount rate.

84 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Balance Sheet

Note 13 investments in associates

Investments in DKK ‘000 associates

Cost at 1 January 2014 44,688 Exchange adjustment -1,622 Cost at 31 December 2014 43,066

Value adjustments at 1 January 2014 87,835 Exchange adjustment -5,647 Dividend, net -24,346 Share of profit for the year 34,808 Other comprehensive income 533 Value adjustments at 31 December 2014 93,183

Carrying amount at 31 December 2014 136,249

Cost at 1 January 2013 46,618 Reclassification,beginning of year 1,444 Exchange adjustment -3,374 Cost at 31 December 2013 44,688

Value adjustments at 1 January 2013 83,164 Exchange adjustment -9,187 Dividend, net -20,474 Share of profit for the year 33,552 Other comprehensive income 780 Value adjustments at 31 December 2013 87,835

Carrying amount at 31 December 2013 132,523

associates financial information

Financial disclosures are provided on an aggregated basis for all associates as none of them has net revenue or a balance sheet total constituting more than 5% of those of the Consolidated Financial Statements; therefore, it is not considered essential to provide ­disclosures separately for each associate.

Royal Unibrew’s share of:

2014 2013

Profit from continuing operations for the year 34,808 33,552 Other comprehensive income 533 780 Comprehensive income 35,341 34,332

Share of equity 136,249 132,523 Total carrying amount at 31 December of the Group’s total investments in associates 136,249 132,523

Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 85

Notes to Consolidated Balance Sheet

Note 13 investments in associates (continued)

Investments in associates in the Consolidated Financial Statements

Investments in associates are measured in the balance sheet at the proportionate share of the net asset value of the enterprises cal- culated under the accounting policies of the Group with deduction or addition of the proportionate share of unrealised intercompany profits and losses and with addition of the carrying amount of goodwill.

Associates with a negative net asset value are measured at DKK 0. If the Group has a legal or constructive obligation to cover the ­negative balance of the associate, this obligation is recognised in liabilities.

The proportionate share of the results of associates is recognised in the income statement of the Group after adjusting for impairment losses on goodwill and eliminating the proportionate share of unrealised intercompany gains and losses.

86 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Balance Sheet

Note 14 other fixed asset investments

Total other Other Other fixedasset DKK ‘000 investments receivables investments

Cost at 1 January 2014 68,503 8,718 77,221 Exchange adjustment -1,799 94 -1,705 Disposals -6,130 -6,130 Cost at 31 December 2014 66,704 2,682 69,386

Value adjustments at 1 January 2014 -52,772 -364 -53,136 Exchange adjustment 1,770 1 1,771 Revaluations and impairment losses for the year -1,253 -1,253 Value adjustments at 31 December 2014 -52,255 -363 -52,618

Carrying amount at 31 December 2014 14,449 2,319 16,768

Cost at 1 January 2013 55,818 10,009 65,827 Exchange adjustment -873 -5 -878 Additions 8,683 8,683 Additions on acquisition 4,875 4,875 Disposals -1,286 -1,286 Cost at 31 December 2013 68,503 8,718 77,221

Value adjustments at 1 January 2013 -53,198 -364 -53,562 Exchange adjustment 874 874 Revaluations and impairment losses for the year -448 -448 Value adjustments at 31 December 2013 -52,772 -364 -53,136

Carrying amount at 31 December 2013 15,731 8,354 24,085

Other investments

Other investments not included in the Group’s trading portfolio (available for sale) are recognised in non-current assets at cost at the trading date and are subsequently measured at fair value equal to the market price as regards listed securities and at estimated fair value calculated on the basis of market data and recognised valuation methods as regards unlisted securities. Unrealised value adjustments are recognised in other comprehensive income except for impairment losses and reversal of impairment losses which are recognised in financial income and expenses in the income statement. Upon realisation, the accumulated value adjustment recognised in other comprehensive income is transferred to financial income and expenses in the income statement. Other investments may be classified as level-3 instruments.

Other receivables

Other receivables under fixed asset investments held to maturity are initially recognised at cost and are subsequently measured at amortised cost or an estimated lower value at the balance sheet date.

Other investments

In connection with the presentation of the Financial Statements for 2011, Management estimated the fair value of its investments in the Polish brewery company Perla Browary Lubelskie at DKK 0 due to governance issues. Since 2011, Management has maintained its fair value estimate of DKK 0 as these issues have not subsequently been resolved. The fair value measurement of the investments in Perla Browary Lubelskie is classified in level 3 of the fair value hierarchy. Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 87

Notes to Consolidated Balance Sheet

Note 15 inventories

DKK ‘000 2014 2013

Raw materials and consumables 109,120 106,709 Work in progress 21,880 24,016 Finished goods and goods for resale 181,041 199,734 Inventories 312,041 330,459

Inventories

Indirect production costs are comprised in work in progress and finished goods with DKK 21 million (2013: DKK 26 million)

Inventories

Inventories are measured at the lower of cost under the FIFO method and net realisable value of individual product groups. The net realisable value of inventories is calculated at the amount of future sales revenues expected to be generated by inventories at the balance sheet date in the process of normal operations and determined allowing for marketability, obsolescence and development in expected sales sum with deduction of calculated selling expenses.

The cost of raw materials, consumables, goods for resale and purchased finished goods comprises invoiced price plus expenses directly attributable to the acquisition.

The cost of work in progress and finished goods comprises the cost of materials and direct labour with addition of indirect production costs. Indirect production costs comprise the cost of indirect materials and labour as well as maintenance and depreciation of and impairment losses on the machinery, factory buildings and equipment used in the manufacturing process as well as costs of factory administration and management. 88 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Balance Sheet

Note 16 receivables

DKK ‘000 2014 2013

Trade receivables 473,569 449,228 Other receivables 62,751 56,496 Receivables 536,320 505,724

The total receivables belong to the category “assets measured at amortised cost”.

Trade receivables fall due as follows:

DKK ‘000 31/12 2014 1/12 2013

Not due 410,077 357,240 Due: From 1-15 days 65,036 84,076 From 16-90 days 7,636 18,680 More than 90 days 21,473 94,145 19,566 122,322

Provisions for bad debts, not due -9,080 -6,177 Provisions for bad debts, 1-15 days -543 -4,263 Provisions for bad debts, 16-90 days -2,098 -2,256 Provisions for bad debts, more than 90 days -18,932 -30,653 -17,638 -30,334 Total 473,569 449,228

Provisions for bad debts, beginning of year -30,334 -30,436 Bad debts realised during the year 9,773 8,560 Additions on acquisition -2,490 Provision for the year -10,092 -5,968 Total -30,653 -30,334

Current receivables, other than trade receivables, all fall due for payment in 2015.

Receivables

Receivables are initially measured at cost and are subsequently measured at amortised cost or an estimated lower value at the balance sheet date. This lower value is calculated where there is an objective indication that an individual receivable or a portfolio of receivables has been impaired.

Receivables with no objective indication of impairment on an individual basis are assessed for objective indication of impairment on a portfolio basis. The portfolios are primarily based on the debtors’ registered offices and credit rating in accordance with the Group’s policy for credit risk management. The objective indicators used in connection with portfolios are determined based on Management’s assessment and knowledge of the individual portfolios.

If there is an objective indication of impairment of a portfolio, an impairment test is made in connection with which the expected fu- ture cash flows are estimated based on the historical loss record adjusted for current market conditions and individual factors relating to the portfolio in question.

Write-downs are calculated as the difference between the carrying amount of the receivable and the present value of the expected cash flows, including the realisable value of any collateral received.

Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 89

Notes to Consolidated Balance Sheet

Note 16 receivables (continued)

tRade receivables

Receivables are written down on the basis of an individual assessment of the loss risk relating to the receivables or groups of ­receivables, including their maturity profiles and the current credit standing of the debtors.

Note 17 Prepayments

DKK ‘000 2014 2013

Prepayments 20,011 23,022

Prepayments

Prepayments recognised in assets comprise expenses incurred in respect of subsequent financial years.

Note 18 Equity and basis of earnings/cash flow per share

Treasury shares held by the Parent Company:

DKK ‘000 Number Nom. value % of capital

Portfolio at 1 January 2014 60,000 600 0.5 Portfolio at 31 December 2014 60,000 600 0.5

Portfolio at 1 January 2013 382,948 3,829 3.6 Additions 206,638 2,067 1.9 Reduction of capital -480,000 -4,800 -4.5 Disposals -49,586 -496 -0.5 Portfolio at 31 December 2013 60,000 600 0.5

The Group holds no other treasury shares.

Basis of calculation of earnings and cash flow per share 2014 2013

The Parent Company shareholders’ share of profit for the year amounts to (DKK ‘000) 624,165 479,576 The average number of treasury shares amounted to (number) 60,000 203,812 The average number of shares in circulation amounted to (number) 11,038,500 10,458,688 The average number of shares in circulation incl restricted shares amounted to (number) 11,098,500 10,478,688

Diluted earnings and cash flow per share have been calculated on the basis of the Parent Company shareholders’ share of profit/loss for the year. 90 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Balance Sheet

Note 18 Equity and basis of earnings/cash flow per share (continued)

Equity/Proposed dividend

Dividend is recognised as a liability at the time of adoption at the Annual General Meeting. Dividend distribution for the year proposed by Management is disclosed as a separate equity item.

Treasury shares

Treasury shares acquired by the Parent Company or subsidiaries are recognised at cost directly in equity under retained earnings. Where treasury shares are subsequently sold, any consideration is also recognised directly in equity. Dividend on treasury shares is recognised directly in equity under retained earnings.

Translation reserve

The translation reserve in the Consolidated Financial Statements comprises exchange adjustments arising on the translation of the Financial Statements of foreign enterprises from their functional currencies into the presentation currency of the Group (DKK).

Upon full or part realisation of the net investment in the foreign enterprises, exchange adjustments are recognised in the income statement

The translation reserve was reset at 1 January 2004 in accordance with IFRS 1.

Hedging reserve

The hedging reserve comprises changes to fair values of derivative financial instruments that are designated and qualify as cash flow hedges

On realisation, the hedging instrument is recognised in the income statement in the same item as the hedged transaction.

Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 91

Notes to Consolidated Balance Sheet

Note 19 Deferred tax

2014 2013

Deferred tax at 1 January 457,571 144,795 Additions on acquisition, cf. note 25 -6,000 353,180 Change in deferred tax for the year -6,631 19,565 Revaluation project development property 16,100 19,000 Change sale of project development property -24,500 -19,168 Exchange adjustment -1,201 Changes to tax rates -5,000 -59,801 Adjustment of previous year 1,435 Deferred tax at 31 December 431,774 457,571

Expected due within 1 year 14,239 -202

Deferred tax relates to: Intangible assets 267,952 272,446 Property, plant and equipment 185,583 191,033 Current assets -161 7,521 Non current liabilities -5,800 Current liabilities -15,800 -13,429 Total 431,774 457,571

The utilisation of unutilised tax losses in one of the Group’s foreign enterprises is not certain. Therefore, the tax asset corresponding to approx DKK 2.5 million (2013: approx DKK 2.5 million) has not been capitalised.

Deferred tax

Deferred tax is recognised in respect of all temporary differences between the carrying amounts and the tax base of assets and liabilities except for temporary differences arising at the time of acquisition that do not affect the profit for the year or the taxable income and temporary differences concerning goodwill. In cases where the computation of the tax base may be made according to alternative tax rules, deferred tax is measured on the basis of the intended use of the asset or settlement of the liability, respectively.

Deferred tax assets are recognised at the value at which they are expected to be realised, either by elimination in tax on future earnings or by set-off against deferred tax liabilities.

Deferred tax is measured on the basis of the tax rules and tax rates expected under the legislation at the balance sheet date to be effec- tive when the deferred tax crystallises as current tax.

In the balance sheet, set-off is made between deferred tax assets and deferred tax liabilities within the same legal tax entity and jurisdiction.

Deferred tax

Deferred tax assets, including the value of tax losses that may be carried forward for set-off against positive taxable incomes infuture ­ years, are recognised if, in Management’s judgement, the possibility hereof exists. The judgement is made annually.

92 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Notes to Consolidated Balance Sheet

Note 20 other current payables

2014 2013

VAT, excise duties, etc 339,481 370,737 Other payables 399,848 411,315 Repurchase obligation, returnable packaging 132,942 103,938 Total other current payables 872,271 885,990

Repurchase obligation, returnable packaging is specified as follows: Balance at 1 January 103,938 36,211 Additions on acquisition, cf. note 25 30,000 68,612 Adjustment for the year -996 -885 Balance at 31 December 132,942 103,938

Comment

The change in the repurchase obligation for the year reflects net sales of returnable packaging for the year less estimated wastage of returnable packaging in circulation.

The reduction in the repurchase obligation is primarily due to beer and soft drinks in Denmark being sold to a larger extent in recycable non-returnable packaging against previously in returnable packaging.

Repurchase obligation relating to packaging in circulation

Plastic crates, bottles and kegs in circulation and held in inventory are recognised in property, plant and equipment, and the obligation to repurchase returnable packaging in circulation for which a deposit has been paid is recognised in provisions.

Re purchase obligation relating to packaging in circulation

The repurchase obligation relating to packaging in circulation is calculated on the basis of the estimated total packaging volume less packaging held in inventory. Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 93

Notes to Consolidated Balance Sheet

Note 21 Debts

DKK ‘000 2014 2013

Debts 4,205,487 4,791,535

Debts

Mortgage loans and loans from credit institutions are recognised initially at the proceeds received net of transaction expenses incurred. Subsequently, the financial obligations are measured at amortised cost equal to the capitalised value using the effective interest method; the difference between the proceeds and the nominal value is recognised in financial income and expenses in the income statement over the loan period.

Other debts, comprising trade payables, payables to subsidiaries and associates, VAT, excise duties, etc as well as other payables, are measured at amortised cost, substantially corresponding to the nominal debt.

Debts

In connection with the acquisition of Hartwall in 2013, defined benefit liabilities were acquired relating to a pension scheme which has not been offered to new employees for a number of years. At 31 December 2014, the net liability amounted to approx DKK 16 million (2013: approx DKK 13 million). Taking into account the amount of the liability, that it has been at the same level in recent years and that it is be- ing phased out, Management does not consider it material to provide the disclosures on the composition of the liability required by IAS 19.

Note 22 Cash Flow Statement

Adjustments for non-cash operating items:

DKK ‘000 2014 2013

Financial income -8,174 -4,345 Financial expenses 68,596 49,685 Amortisation, depreciation and impairment of intangible assets and property, plant and equipment 304,719 170,443 Tax on the profit for the year 176,439 68,707 Income from investments in associates -34,808 -33,552 Profit and loss from sale of property, plant and equipment -995 1,338 Share-based payments and remuneration 9,900 3,300 Total 515,677 255,576

CASH FLOW STATEMENT

The consolidated cash flow statement is presented under the indirect method based on the net profit for the year. The statement shows cash flow for the year, changes for the year in cash and cash equivalents as well as the Group’s cash and cash equivalents at the beginning and end of the year.

Cash flow from operating activities is calculated as the net profit/loss for the year adjusted for non-cash operating items, changes in working capital, financial income and financial expenses, and corporation tax paid.

Cash flow from investing activities comprises acquisitions and disposals of property, plant and equipment and fixed asset investments as well as dividend received from associates. Cost is measured inclusive of expenses necessary to make the acquisition and sales prices after deduction of transaction expenses.

Cash flow from financing activities comprises changes to the amount or composition of the Group’s share capital, payment of dividend as well as borrowing and repayment of interest-bearing debt.

Cash and cash equivalents include securities with a maturity of less than 3 months that can readily be turned into cash and are only subject to an insignificant risk of value changes. 94 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Other notes to Consolidated Annual Report

Note 23 contingent liabilities, security and other liabilities mDKK 2014 2013

Rental and operating lease commitments Total future payments: Within 1 year 48.4 60.4 Between 1 and 5 years 89.3 71.2 Beyond 5 years 7.7 Total 145.4 131.6

The operating lease commitments relate to operating leases of property and operating equipment including IT equipment.

Third-party guarantees 0 0

Finance lease commitments Total future payments: Within 1 year 7.9 46.8 Between 1 and 5 years 53.5 61.8 Total 61.4 108.6

The finance lease commitments relate to finance leases of production machinery.

Security No security has been provided in respect of the Group’s loan agreements with credit institutions.

Contingent liabilities The outcome of pending legal actions is not expected to have any material impact on the financial position of the Parent Company or the Group.

Note 24 Related parties

Related parties comprise the Board of Directors and the Executive Board as well as subsidiaries and associates, see the sections on Board of Directors and Executive Board on page 42 and Group Structure on page 118. No shareholder exercises control.

All transactions, including lending, are carried out on an arm’s length basis.

The following transactions have been made with related parties: Group 2014 2013

Revenue Sales to associates 5,199 6,056

Financial income and expenses Dividends from associates 24,346 20,474

Executive Board Cash-based remuneration 18,508 31,978 Debt re cash-based bonus 16,578 14,090 Accumulated value of share-based payments (restricted shares) 13,200 3,300

Board of Directors Remuneration 3,229 2,875

Transactions with subsidiaries are eliminated in the Consolidated Financial Statements in accordance with the accounting policies applied.

Consolidated Annual Report ANNUAL REPORT 2014 Royal Unibrew 95

Other notes to the Consolidated Annual Report

Note 25 sALes and acquisitions of subsidiaries

Royal Unibrew made no business acquisitions or sales in 2014.

2013 Acquisition of subsidiary On 23 August 2013, Royal Unibrew acquired control of Oy Hartwall Ab by acquiring all outstanding shares from Heineken International B.V.

The acquisition has created a broader and stronger earnings base, which is in line with Royal Unibrew’s strategy of being a focused and strong regional player in the brewery industry. Moreover, Royal Unibrew has significantly reinforced its market position in the Baltic Sea re- gion, and the acquisition allows Royal Unibrew to expand its position as the second-largest brewery group in the Nordic and Baltic countries.

A multi-beverage business with a broad product range, Hartwall holds a clear runner-up position in Finland. With its own brands such as the Karjala and Lapin Kulta beer brands, Jaffa (soft drinks), Original (RTD), Upcider (cider), ED (energy drink) and Novelle (mineral water) as well as international brands such as Fosters, Heineken and Pepsi, Hartwall is the market leader in the categories of mineral water, cider and ready-to-drink (RTD) and a strong number 2 in the categories of branded beer, soft drinks and energy drinks. Non-alcoholic beverages account for 43% of revenue, whereas beer, cider and RTD make up 44%. The trading company Hartwa-Trade operates agencies for a number of international wine and spirits brands and contributes 13% of Hartwall’s revenue.

Hartwall is headquartered in Helsinki and operates two modern and well-invested production facilities in Lahti (produces all products but mineral water) and Karijoki (produces mineral water). A distribution network of own terminals supplies approx 15,000 off-trade and on- trade Hartwall customers directly. Hartwall sells about 90% of its production in its domestic market and the rest is exported, especially for cross-border trade in the Baltic countries.

The acquisition price amounted to DKK 2,775 million, which was paid in cash.

Royal Unibrew A/S has incurred transaction costs of approx DKK 15 million in connection with the acquisition for legal, financial and com- mercial advisers to realise the transaction. The costs have been recognised as other operating expenses.

Hartwall was included in the Consolidated Financial Statements of Royal Unibrew as of the date of acquisition, 23 August 2013.

Royal Unibrew has made the following calculation of the fair values of the acquired net assets and of goodwill at the date of acquisition. Except for liabilities, the calculation remains unchanged as compared to the provisional calculation made at 31 December 2013.

mDKK

Intangible assets 1,398 Other non-current assets 1,250 Current assets 311 Deferred tax -347 Current liabilities -937 Acquired net assets 1,675 Goodwill 1,209 Estimated fair value of the business 2,884 Acquired net interest-bearing debt 109 Cash consideration 2,775

Acquired receivables included trade receivables of a fair value of DKK 97 million. The contractually receivable gross amount was DKK 99 million, DKK 2 million of which was assessed as irrecoverable at the date of acquisition. Goodwill relates to synergies and the potential for developing the acquired assets and is not deductible for tax purposes.

At the time of acquisition, the Hartwall acquisition was expected, on a full-year basis (2013), to affect consolidated net revenue and earnings before interest and tax (EBIT) by approx DKK 2.3 billion and approx DKK 200 million, respectively.

96 ANNUAL REPORT 2014 Royal Unibrew Consolidated Annual Report

Other notes to the Consolidated Annual Report

Note 25 sALes and acquisitions of subsidiaries (continued)

bUsiness combinations

On acquisition of new enterprises the purchase method is applied, under which the identifiable assets and liabilities of newly acquired enterprises are measured at fair value at the time of acquisition.

Upon business combinations, positive differences between cost and fair value of identifiable assets and liabilities acquired are recog- nised as goodwill in intangible assets. At the time of acquisition, goodwill is allocated to the cash-generating units that subsequently form the basis of impairment tests. Goodwill and fair value adjustments in connection with the acquisition of a foreign enterprise with a functional currency that differs from the presentation currency of the Group are treated as assets and liabilities belonging to the for- eign entity and are translated to the functional currency of the foreign entity at the exchange rates at the dates of transaction.

Gains or losses on disposal of subsidiaries and associates are calculated as the difference between the sales sum and thecarrying ­ amount of net assets at the time of sale (including the carrying amount of goodwill) net of expected expenses and adjusted for ­exchange adjustments previously recognised in equity.

Re cognition of acquisition of subsidiary

In August 2013 Royal Unibrew acquired Oy Hartwall Ab by purchasing 100% of the outstanding shares. Hartwall’s assets, liabilities and contingent liabilities have been recognised under the purchase method in the Financial Statements of Royal Unibrew. The key assets of Hartwall are goodwill, trademarks, distribution rights, customer relations, property, plant and equipment, inventories and trade receivables. Especially with regard to the intangible assets acquired, there are no efficient markets to be used to determine fair value. Management has therefore made an estimate in connection with the calculation of the fair value of the acquired assets and liabilities at the date of acquisition and has allocated the purchase price on that basis. The fair value calculation is subject to uncertainty and was subsequently adjusted in July 2014 with DKK 30 million as compared to the calculation at the end of 2013 related to the repurchase obligation for returnable packaging less DKK 6 million deferred tax. The unallocated part of the purchase price has been recognised as goodwill related to synergies and the development potential of the activities acquired. Parent Company ANNUAL REPORT 2014 Royal Unibrew 97

Contents, Parent Company Annual Report

Note Side

Income Statement 98 Statement of Comprehensive Income 98 Balance sheet - Assets 99 Balance sheet - Liabilities and Equity 99 Cash Flow Statement 100 Statement of Changes in Equity 101

Descriptive notes 1 Basis of preparation 102 2 Financial risk management 103

Notes referring to Income Statement, Balance Sheet and Cash Flow Statement 3 Staff expenses 104 4 Expenses broken down by type 105 5 Financial income 106 6 Financial expenses 106 7 Tax on the profit for the year 107 8 Comprehensive income 107 9 Intangible assets 108 10 Property, plant and equipment 109 11 Investments in subsidiaries and associates 110 12 Receivables subsidiaries and other fixed asset investments 111 13 Inventories 111 14 Receivables 111 15 Share capital 112 16 Deferred tax 112 17 Other current payables 112 18 Cash Flow Statement 113

Other notes 19 Contingent liabilities, and other liabilities 114 20 Related parties 115 98 ANNUAL REPORT 2014 Royal Unibrew Parent Company

Parent Company Income Statement for 1 January - 31 December

DKK ‘000 Note 2014 2013

Net revenue 2,945,891 2,906,378

Production costs 3,4 -1,412,923 -1,426,457 Gross profit 1,532,968 1,479,921

Sales and distribution expenses 3,4 -854,777 -839,316 Administrative expenses 3,4 -162,024 -165,445 Other operating income 0 2,642 Other operating expenses 0 -15,161 EBIT 516,167 462,641

Dividend from subsidiaries and associates 271,588 153,189 Financial income 5 13,653 11,629 Financial expenses 6 -58,563 -46,341

Profitbefore tax 742,845 581,118

Tax on the profit for the year 7 -113,201 -119,435

Net profit for the year 629,644 461,683

Earnings per share (DKK) 56.5 45.9 Diluted earnings per share (DKK) 56.2 45.8

Parent Company Statement of Comprehensive Income for 1 January - 31 December

DKK ‘000 Note 2014 2013

Net profit for the year 629,644 461,683

Other comprehensive income Items that may be reclassified to the income statement Value adjustment of hedging instruments, beginning of year 42,678 56,886 Value adjustment of hedging instruments, end of year -29,990 -42,678 Tax on hedging instruments, (interest-rate hedging) 7 -2,664 -4,429 Total 10,024 9,779

Items that may not be reclassified to the income statement Revaluation of non-current assets 70,000 90,000 Tax on equity entries 7 -16,100 -19,000 Total 53,900 71,000

Other comprehensive income after tax 8 63,924 80,779

Total comprehensive income 693,568 542,462 Parent Company ANNUAL REPORT 2014 Royal Unibrew 99

Parent Company Balance Sheet

DKK ‘000 Note 2014 2013

Assets at 31 December

NON-CURRENT assets Intangible assets 9 83,744 84,124 Project development properties 10 238,439 290,539 Property, plant and equipment 10 849,801 811,009 Investments in associates 11 77,374 77,374 Investments in subsidiaries 11 3,484,159 3,476,657 Receivables subsidiaries 12 163,709 155,428 Other fixed asset investments 12 4,642 10,694 Non-current assets 4,901,868 4,905,825

CURRENT assets Inventories 13 115,029 114,926 Receivables 14 221,026 230,512 Receivables subsidiaries 102,320 243,229 Corporation tax 25 9,209 Prepayments 18,238 21,196 Cash at bank and in hand 53,628 107,272 Current assets 510,266 726,344

Assets 5,412,134 5,632,169

Liabilities and Equity at 31 December

EQUITY Share capital 15 110,985 110,985 Other reserves 952,465 949,666 Retained earnings 1,556,617 1,197,202 Proposed dividend 344,054 0 Equity 2,964,121 2,257,853

Deferred tax 16 151,852 166,072 Mortgage debt 2 733,672 747,742 Credit institutions 2 806,076 1,036,326 Other payables 24,713 17,318 Non-current liabilities 1,716,313 1,967,458

Mortgage debt 2 14,106 14,159 Credit institutions 2 5 717,275 Trade payables 341,032 340,614 Payables to subsidiaries 111,466 6,928 Other current payables 17 265,091 327,882 Current liabilities 731,700 1,406,858

Liabilities 2,448,013 3,374,316

Liabilities and equity 5,412,134 5,632,169 100 ANNUAL REPORT 2014 Royal Unibrew Parent Company

Parent Company Cash Flow Statement for 1 January - 31 December

DKK ‘000 Note 2014 2013

Net profit for the year 629,644 461,683 Adjustments for non-cash operating items 18 -18,405 88,611 611,239 550,294

Change in working capital: Receivables 10,956 -139,567 Inventories -103 5,006 Payables -34,800 91,153 Cash flow from operating activities before financial income and expenses 587,292 506,886

Financial income 16,611 11,629 Financial expenses -60,192 -56,298 Cash flow from operating activities 543,711 462,217

Corporation tax paid -109,701 -107,726 Cash flow from operating activities 434,010 354,491

Dividends received from subsidiaries and associates 271,588 153,189 Sale of property, plant and equipment 132,070 86,049 Corporation tax paid -24,500 -19,168 Purchase of property, plant and equipment -133,554 -111,885

Free cash flow 679,614 462,676

Increase of capital/Business acquisitions -7,502 -2,775,124 Acquisition/sale of intangible assets and fixed asset investments 6,052 1,281 Cash flow from investing activities 244,154 -2,665,658

Debt financing: Proceeds from increased debt 0 1,925,967 Repayment of debt -961,643 -4,789 Change in financing of subsidiaries 229,835 -14 Shareholders: Dividends paid to shareholders 0 -242,107 Acquisition of shares for treasury 0 -110,189 Proceeds from share issue 0 561,214 Sale of treasury shares 0 25,131 Cash flow from financing activities -731,808 2,155,213

Change in cash and cash equivalents -53,644 -155,954 Cash and cash equivalents at 1 January 107,272 263,226 Cash and cash equivalents at 31 December 53,628 107,272 Parent Company ANNUAL REPORT 2014 Royal Unibrew 101

Parent Company Statement of Changes in Equity for 1 January - 31 December

Proposed Share Total dividend share premium Revaluation hedging other Retained for the DKK ‘000 capital account reserves reserve reserves earnings year Total

Equity at 31 December 2013 110,985 855,839 136,505 -42,678 949,666 1,197,202 0 2,257,853

Changes in equity in 2014 Profit for the year 0 629,644 629,644 Other comprehensive income 53,900 12,688 66,588 -2,664 63,924 Revaluation reserves realised -63,789 -63,789 63,789 0 Total comprehensive income 0 0 -9,889 12,688 2,799 690,769 0 693,568 Share-based payments 0 9,900 9,900 Proposed dividend 0 0 -377,349 377,349 0 Tax on equity postings, shareholders 0 0 2,800 2,800 Total shareholders 0 0 0 0 0 -364,649 377,349 12,700 Total changes in equity in 2014 0 0 -9,889 12,688 2,799 326,120 377,349 706,268 Equity at 31 December 2014 110,985 855,839 126,616 -29,990 952,465 1,523,322 377,349 2,964,121

Share premium account, hedging reserve and retained earnings may be applied for distribution of dividend to the Parent Company shareholders.

The share capital at 31 December 2014 amounts to DKK 110,985,000 and is distributed on shares of DKK 10 each.

Proposed dividend for the year is DKK 34 per share.

Equity at 31 December 2012 105,700 319,205 112,320 -56,886 374,639 744,023 253,680 1,478,042

Changes in equity in 2013 Profit for the year 0 461,683 461,683 Other comprehensive income 71,000 14,208 85,208 -4,429 80,779 Revaluation reserves realised -46,815 -46,815 46,815 0 Total comprehensive income 0 0 24,185 14,208 38,393 504,069 0 542,462 Increase of capital 10,085 551,129 551,129 561,214 Dividends paid to shareholders 0 -242,107 -242,107 Dividend on treasury shares 0 11,573 -11,573 0 Acquisition of shares for treasury 0 -110,189 -110,189 Sale of treasury shares 0 25,131 25,131 Share-based payments 0 3,300 3,300 Reduction of capital -4,800 -14,495 -14,495 19,295 0 Total shareholders 5,285 536,634 0 0 536,634 -50,890 -253,680 237,349 Total changes in equity in 2013 5,285 536,634 24,185 14,208 575,027 453,179 -253,680 779,811 Equity at 31 December 2013 110,985 855,839 136,505 -42,678 949,666 1,197,202 0 2,257,853 102 ANNUAL REPORT 2014 Royal Unibrew Parent Company

Descriptive notes to Parent Company Annual Report

Note 1 bAsis of preparation of Parent Company Annual Report

BASIS OF PREPARATION New and amended standards and inter- at the balance sheet date. In connection pretations that have taken effect with the financial reporting for 2014, the sIgnificant accounting policies Reference is made to note 1 to the Consoli- following judgments have been made dated Financial Statements. materially affecting the related items as The Parent Company’s accounting policies described in relevant notes, see list below. remain unchanged from last year. Signifi- Critical judgements cant accounting policies are identical to and accounting estimates C ritical accounting estimates those applied by the Royal Unibrew Group In connection with the preparation of except for those mentioned below. the Parent Company and Consolidated Fi- Management’s estimates are based on nancial Statements, Management makes assumptions which Management consid- Translation policies estimates and judgements as to how rec- ers reasonable but which are inherently Exchange adjustment of balances re- ognition and measurement of assets and uncertain and unpredictable. In connec- garded as part of the total net investment liabilities should take place based on the tion with the financial reporting for 2014, in enterprises with another functional accounting policies applied. the following critical estimates have been currency than DKK is recognised in finan- made as desribed in relevant notes, see cial income and expenses in the Parent J udgements as an element list below. Company income statement. in significant accounting policies Accounting policies, judgements as an Dividend on investments in subsidiaries element in significant accounting policies and associates is recognised in the Parent The calculation of carrying amounts of as well as critical accounting estimates are Company income statement in the finan- certain assets and liabilities requires described in the notes: cial year in which dividend is declared. judgement as to how assets and liabilities should be classified in the Financial State- ments and how future events will affect the value of these assets and liabilities

C consolidated financial Parent company financial statement note statement note Derivative financial instruments 2 Segment reporting 3 Net revenue 4 Share-based payments 5 Expenses 6 Financial income and expenses 8 Corporation tax 9 Intangible assets 11 9 Property, plant and equipment 12 Investments in associates 11 Investments in subsidiaries 13 11 Other fixed asset investments 14 Inventories 15 Receivables 16 Prepayments 17 Equity 18 Deferred tax 19 Repurchase obligation packaging in circulation 20 Debt 21 Cash Flow Statement 22 Business combinations 25

= Comments to the note Parent Company ANNUAL REPORT 2014 Royal Unibrew 103

Descriptive notes to Parent Company Annual Report

Note 2 financial risk management

Financial liabilities 31/12 2014

Maturity contractual maturity > 1 year maturity carrying DKK ‘000 cash flows < 1 year < 5 years > 5 years amount

Non-derivative financialinstruments: Financial debt, gross 1,553,859 14,111 940,070 599,678 1,553,859 Financial debt, subsidiaries 105,605 105,605 105,605 Interest expenses 167,431 36,541 53,619 77,271 Trade payables and repayment obligation re packaging 346,893 346,893 346,893 Other payables 289,804 265,091 24,713 289,804 Total 2,463,592 768,241 1,018,402 676,949 2,296,161

The debt breaks down on the categories “debt at amortised cost” with DKK 2,266 million and “debt at fair value” with DKK 30 million. The fair value of the total debt is assessed to equal carrying amount.

31/12 2013

Maturity contractual maturity > 1 year maturity carrying DKK ‘000 cash flows < 1 year < 5 years > 5 years amount

Non-derivative financialinstruments: Financial debt, gross 2,515,502 731,434 942,729 841,339 2,515,502 Financial debt, subsidiaries 6,928 6,928 6,928 Interest expenses 181,923 37,400 75,397 69,126 Trade payables and repayment obligation re packaging 340,614 340,614 340,614 Other payables 345,200 327,882 17,318 345,200 Total 3,390,167 1,444,258 1,035,444 910,465 3,208,244

The debt breaks down on the categories “debt at amortised cost” with DKK 3,165 million and “debt at fair value” with DKK 43 million. The fair value of the total debt is assessed to equal carrying amount. For a description of the Parent Company’s and the Group’s currency, interest rate, credit, commodity and other risks as well as capital management, reference is made to note 2 to the Consolidated Financial Statements.

104 ANNUAL REPORT 2014 Royal Unibrew Parent Company

Notes to Parent Company Income Statement

Note 3 Staff expenses

Staff expenses are included in production costs, sales and distribution expenses as well as administrative expenses and break down as follows:

DKK ‘000 2014 2013

Salaries to Executive Board 12,850 12,010 Ordinary bonus scheme for Executive Board 6,038 5,658 Long-term bonus scheme for Executive Board 2,108 6,981 Share-based payments to Executive Board (restricted shares) 9,900 3,300 Remuneration of Executive Board 30,896 27,949 Remuneration of Board of Directors 3,229 2,875 34,125 30,824

Wages and salaries 387,944 385,551 Contributions to pension schemes 30,999 30,025 Share-based payments 418,943 415,576

Other social security expenses 6,418 6,845 Other staff expenses 18,631 21,773 Total 478,117 475,018

Average number of employees 867 884

Reference is made to note 2 to the Consolidated Financial Statements for a description of share-based payments to Executive Board (restricted shares). Parent Company ANNUAL REPORT 2014 Royal Unibrew 105

Notes to Parent Company Income Statement

Note 4 expenses broken down by type

DKK ‘000 2014 2013

The aggregated Production costs 1,412,923 1,426,457 Sales and distribution expenses 854,777 839,316 Administrative expenses 162,024 165,445 Total 2,429,724 2,431,218 broken down by type as follows: Raw materials and consumables 1,115,049 1,129,828 Wages, salaries and other staff expenses 478,117 475,018 Operating and maintenance expenses 136,880 127,859 Distribution expenses and carriage 105,600 110,660 Sales and marketing expenses 426,629 424,399 Bad trade debts 3,709 1,383 Officesupplies etc 78,568 77,718 Depreciation and profit from sale of property, plant and equipment 85,172 84,353 Total 2,429,724 2,431,218

Total depreciation and impairment losses as well as profit from sale of property, plant and equipment are included in the following items in the income statement:

DKK ‘000 2014 2013

Production costs 56,528 54,025 Sales and distribution expenses 18,632 18,541 Administrative expenses 10,012 11,787 Total 85,172 84,353

Fee to auditors

DKK ‘000 2014 2013

Fee for the audit of the Annual Report: Ernst & Young 800 775 Total 800 775

Ernst & Young fee for non-audit services: Tax assistance 47 221 Other assurance assistance 50 277 Other assistance 216 341 Total 313 839

106 ANNUAL REPORT 2014 Royal Unibrew Parent Company

Notes to Parent Company Income Statement

Note 5 financial income

DKK ‘000 2014 2013

Interest income Cash at bank and in hand 20 220 Trade receivables 5 42 Receivables from subsidiaries 6,724 7,087 Other financialincome 13 2,611

Exchange adjustments Cash at bank and in hand and external loans 2,422 Trade payables 611 308 Trade receivables 3,297 Intercompany loans 561 617 Forward contracts 744 Total 13,653 11,629

Note 6 Financial expenses

DKK ‘000 2014 2013

Interest expenses Mortgage credit institutes 27,977 25,457 Credit institutions 27,030 11,607 Payables to subsidiaries 124 157

Exchange adjustments Cash at bank and in hand and external loans 527 Trade receivables 1,692 Forward contracts 1,656 100 Other financialexpenses 1,776 6,801 Total 58,563 46,341 Parent Company ANNUAL REPORT 2014 Royal Unibrew 107

Notes to Parent Company Income Statement

Note 7 tAx on the profit for the year

DKK ‘000 2014 2013

Tax on the taxable income for the year 142,400 121,351 Adjustment of previous year 2,420 -367 Adjustment of deferred tax -15,655 21,880 Total 129,165 142,864 which breaks down as follows: Tax on profit for the year 113,201 119,435 Tax on equity entries 15,964 23,429 Total 129,165 142,864

Current Danish tax rate 24.5 25.0 Dividends from subsidiaries and associates -9.0 -6.3 Effect on tax rate of permanent differences 0.1 4.9 Adjustment of previous year 0.3 -0.1 Changes to tax rates -0.7 -2.9 Effectivetax rate 15.2 20.6

Note 8 comprehensive income

DKK ‘000 2014 2013

Realised hedging transactions are included in the income statement as follows: Net revenue includes currency hedges of -4,697 1,065 Production costs include foreign currency and commodity hedges of 1,147 -8,430 Financial income and expenses include currency, commodity and interest rate hedges of -17,356 -18,707 Total -20,906 -26,072 108 ANNUAL REPORT 2014 Royal Unibrew Parent Company

Notes to Parent Company Balance Sheet

Note 9 intangible assets

Distribution DKK ‘000 Goodwill Trademarks rights Total

Cost at 1 January 2014 80,645 2,990 11,828 95,463 Cost at 31 January 2014 80,645 2,990 11,828 95,463

Amortisation and impairment losses at 1 January 2014 0 0 -11,339 -11,339 Amortisation for the year -380 -380 Amortisation and impairment losses at 31 December 2014 0 0 -11,719 -11,719

Carrying amount at 31 December 2014 80,645 2,990 109 83,744

Cost at 1 January 2013 80,645 2,990 11,828 95,463 Cost at 31 December 2013 80,645 2,990 11,828 95,463

Amortisation and impairment losses at 1 January 2013 0 0 -10,156 -10,156 Amortisation for the year -1,183 -1,183 Amortisation and impairment losses at 31 December 2013 0 0 -11,339 -11,339

Carrying amount at 31 December 2013 80,645 2,990 489 84,124

Trademarks

Trademarks are not amortised as they are all well-established, old and profitable trademarks which customers are expected to continue demanding unabatedly, other things being equal, and which Management is not planning to stop selling and marketing.

Reference is made to note 11 to the Consolidated Financial Statements for a description of impairment test.

Parent Company ANNUAL REPORT 2014 Royal Unibrew 109

Notes to Parent Company Balance Sheet

Note 10 property, plant and equipment

Other Other fixtures, Property, property, Project and fittings, plant and plant and development Land and Plant and tools and equipment equipment DKK ‘000 properties buildings machinery equipment in progress Total

Cost at 1 January 2014 145,703 663,736 1,149,738 435,661 26,485 2,275,620 Additions 2,905 20,344 41,432 40,121 28,752 130,649 Disposals -54,073 -923 -7,603 -34,455 -42,981 Transfers for the year 47 10,744 15,694 -26,485 0 Cost at 31 December 2014 94,535 683,204 1,194,311 457,021 28,752 2,363,288

Depreciation and impairment losses at 1 January 2014 144,836 -337,204 -811,394 -316,013 0 -1,464,611 Revaluations for the year 70,000 0 Depreciation for the year -14,520 -35,006 -36,476 -86,002 Reversal of depreciation and impairment of assets sold and discontinued -70,932 295 7,010 29,821 37,126 Depreciation and impairment losses at 31 December 2014 143,904 -351,429 -839,390 -322,668 0 -1,513,487

Carrying amount at 31 December 2014 238,439 331,775 354,921 134,353 28,752 849,801

Land and buildings including plant and maschinery at a carrying amount of DKK 678.7 million have been provided as security for ­mortgage debt of DKK 747.8 million.

Other Other fixtures, Property, property, Project and fittings, plant and plant and development Land and Plant and tools and equipment equipment DKK ‘000 properties buildings machinery equipment in progress Total

Cost at 1 January 2013 158,842 652,719 1,064,490 443,488 64,839 2,225,536 Additions 2,901 2,124 47,534 33,978 25,348 108,984 Disposals -16,040 -52 -13,582 -45,266 -58,900 Transfers for the year 8,945 51,296 3,461 -63,702 0 Cost at 31 December 2013 145,703 663,736 1,149,738 435,661 26,485 2,275,620

Depreciation and impairment losses at 1 January 2013 117,496 -322,428 -788,934 -321,630 0 -1,432,992 Revaluations for the year 90,000 0 Depreciation for the year -14,828 -33,454 -34,312 -82,594 Reversal of depreciation and impairment of assets sold and discontinued -62,660 52 10,994 39,929 50,975 Depreciation and impairment losses at 31 December 2013 144,836 -337,204 -811,394 -316,013 0 -1,464,611

Carrying amount at 31 December 2013 290,539 326,532 338,344 119,648 26,485 811,009

Land and buildings including plant and maschinery at a carrying amount of DKK 656.5 million have been provided as security for ­mortgage debt of DKK 761.9 million. Reference is made to note 12 to the Consolidated Financial Statements for a description of project development property.

110 ANNUAL REPORT 2014 Royal Unibrew Parent Company

Notes to Parent Company Balance Sheet

Note 11 investments in subsidiaries and associates

Investments Investments DKK ‘000 in subsidiaries in associates

Cost at 1 January 2014 3,565,692 77,374 Additions 7,502 Cost at 31 December 2014 3,573,194 77,374

Revaluations and impairment losses at 1 January 2014 -89,035 0 Revaluations and impairment losses at 31 December 2014 -89,035 0

Carrying amount at 31 December 2014 3,484,159 77,374

Cost at 1 January 2013 790,568 75,931 Reclassification 1,443 Additions 2,775,124 Cost at 31 December 2013 3,565,692 77,374

Revaluations and impairment losses at 1 January 2013 -89,035 0 Revaluations and impairment losses at 31 December 2013 -89,035 0

Carrying amount at 31 December 2013 3,476,657 77,374

Dividend on investments in subsidiaries and associates

Dividend on investments in subsidiaries and associates is recognised in the Parent Company’s income statement in the financial year in which dividend is declared.

Investments in subsidiaries and associates in the Parent Company Financial Statements

Investments in subsidiaries and associates are measured at cost and tested in the event of indication of impairment. Where cost ­exceeds the recoverable amount, the investment is written down to its lower recoverable amount.

ESTIMATE

The carrying amount of investments in subsidiaries and the values of intangible assets contained therein is tested to identify any ­impairment. Reference is made to note 11 to the Consolidated Financial Statements. Parent Company ANNUAL REPORT 2014 Royal Unibrew 111

Notes to Parent Company Balance Sheet

Note 12 receivables from subsidiaries and Other fixed asset investments

Receivables Total other from Other Other fixed asset DKK ‘000 subsidiaries investments receivables investments

Cost at 1 January 2014 155,428 54,833 8,173 63,006 Exchange adjustment -367 0 Additions 8,648 78 78 Disposals -6,130 -6,130 Cost at 31 December 2014 163,709 54,833 2,121 56,954

Revaluations and impairment losses at 1 January 2014 0 -52,312 0 -52,312 Revaluations and impairment losses at 31 December 2014 0 -52,312 0 -52,312

Carrying amount at 31 December 2014 163,709 2,521 2,121 4,642

Cost at 1 January 2013 155,414 55,708 9,454 65,162 Exchange adjustment 14 -875 -875 Disposals -1,281 -1,281 Cost at 31 December 2013 155,428 54,833 8,173 63,006

Revaluations and impairment losses at 1 January 2013 0 -53,198 0 -53,198 Exchange adjustment 875 875 Revaluations and impairment losses for the year 11 11 Revaluations and impairment losses at 31 December 2013 0 -52,312 0 -52,312

Carrying amount at 31 December 2013 155,428 2,521 8,173 10,694

Note 13 I nventories

DKK ‘000 2014 2013

Raw materials and consumables 42,291 38,045 Work in progress 12,872 13,943 Finished goods and goods for resale 59,866 62,938 Inventories 115,029 114,926

Inventories

Indirect production costs are comprised in work in progress and finished goods with DKK 8 million (2013: DKK 8 million)

Note 14 R eceivables

DKK ‘000 2014 2013

Trade receivables 213,615 220,696 Receivables from associates Other receivables 7,411 9,816 Total receivables 221,026 230,512 112 ANNUAL REPORT 2014 Royal Unibrew Parent Company

Notes to Parent Company Balance Sheet

Note 15 share capital

Reference is made to note 18 to the Consolidated Financial Statements.

Note 16 Deferred tax

DKK ‘000 2014 2013

Deferred tax at 1 January 166,072 144,192 Change in deferred tax for the year -2,255 15,845 Revaluation project development property 16,100 18,996 Change sale of project development property -24,500 -19,168 Changes to tax rates -5,000 6,207 Adjustment of previous year 1,435 Deferred tax at 31 December 151,852 166,072

Expected due within 1 year 30,111 6,418

Deferred tax relates to: Intangible assets 44 131 Property, plant and equipment 135,701 143,003 Non-current assets 18,996 18,996 Current assets 4,749 9,468 Non current liabilities -2,800 Current liabilities -4,838 -5,526 Total 151,852 166,072

Note 17 Other current payables

DKK ‘000 2014 2013

VAT, excise duties, etc 40,855 84,004 Payables to subsidiaries 111,466 6,928 Other payables 85,687 204,952 Repurchase obligation, returnable packaging 27,083 31,998 Total other current payables 265,091 327,882

Repurchase obligation, returnable packaging is specified as follows: Balance at 1 January 31,998 39,429 Adjustment for the year -4,915 -7,431 Balance at 31 December 27,083 31,998

Comment

The change in the repurchase obligation for the year reflects net sales of returnable packaging for the year less estimated wastage of returnable packaging in circulation.

The reduction in the repurchase obligation is primarily due to beer and soft drinks in Denmark now to a greater extent being sold in recyclable disposable containers whereas previously they were sold in returnable containers.

Parent Company ANNUAL REPORT 2014 Royal Unibrew 113

Notes to Parent Company Cash Flow Statement

Note 18 cAsh Flow Statement

Adjustments for non-cash operating items:

DKK ‘000 2014 2013

Dividends from subsidiaries and associates -271,588 -153,189 Financial income -13,653 -11,629 Financial expenses 58,563 46,341 Amortisation, depreciation and impairment of intangible assets and property, plant and equipment 86,382 83,777 Tax on the profit for the year 113,201 119,435 Profit and loss from sale of property, plant and equipment -1,210 576 Share-based payments and remuneration 9,900 3,300 Total -18,405 88,611 114 ANNUAL REPORT 2014 Royal Unibrew Parent Company

Other notes to Parent Company Annual Report

Note 19 Contingent liabilities, security and other liabilities mDKK 2014 2013

Guarantees Guarantees relating to subsidiaries 703.6 253.3 Total 703.6 253.3

The change in the guarantees relates to a guarantee for a mortgage in the finnish subsidiary.

Rental and operating lease commitments Total future payments:

DKK ‘000 2014 2013

Within 1 year 25.2 22.7 Between 1 and 5 years 35.0 29.7 Beyond 5 years 4.6 Total 64.8 52.4

The operating lease commitments relate to operating leases of property and operating equipment including IT equipment.

Third-party guarantees 11.0 10.4

Security No security has been provided in respect of the Group’s loan agreements with credit institutions other than the Parent Company’s ­liability for the amounts drawn by subsidiaries on group credit facilities.

Contingent liabilities The outcome of pending legal actions is not expected to have any material impact on the financial position of the Parent Company or the Group. Parent Company ANNUAL REPORT 2014 Royal Unibrew 115

Other notes to Parent Company Annual Report

Note 20 Related parties

Related parties comprise the Board of Directors and the Executive Board as well as subsidiaries and associates, see the sections on Board of Directors and Executive Board on page 42 and Group Structure on page 118. No shareholder exercises control.

All transactions, including lending, are carried out on an arm’s length basis.

The following transactions have been made with related parties:

DKK ‘000 2014 2013

Revenue Sales to subsidiaries 504,069 555,389 Sales to associates 5,199 6,056

Costs Purchases from subsidiaries 27,542 18,036

Financial income and expenses Dividends from associates 24,346 20,474 Dividends from subsidiaries 247,242 132,715 Interest received from subsidiaries 6,724 7,087

Interest paid to subsidiaries 124 157

Executive Board Cash-based remuneration 18,508 31,978 Debt re cash-based bonus 16,578 14,090 Accumulated value of shared-based payment (restricted shares) 13,200 3,300

Board of Directors Remuneration 3,229 2,875

Intercompany balances at 31 December Loans to subsidiaries 205,314 336,472 Receivables from subsidiaries 60,715 62,185 Loans from subsidiaries 105,605 6,928 Payables to subsidiaries 5,861

Property, plant and equipment Sales to subsidiaries

Capital contributed to subsidiaries 7,502

Guarantees and security Guarantee for subsidiaries 703,590 253,300

116 ANNUAL REPORT 2014 Royal Unibrew

Quarterly Financial Highlights and Ratios (Group)

Q1 Q2 Q3 Q4 mDKK (unaudited) 2014 2013 2014 2013 2014 2013 2014 2013

Sales (million hectolitres) 1.8 1.2 2.6 1.7 2.5 2.0 2.1 2.1

Income Statement Net revenue 1,267 751 1,725 1,042 1,713 1,263 1,351 1,425 Production costs -634 -384 -800 -501 -779 -593 -693 -718 Gross profit 633 367 925 541 934 670 658 707 Gross margin ratio (%) 50.0 48.9 53.6 51.9 54.5 53.0 48.7 49.6 Sales and distribution expenses -493 -259 -530 -329 -506 -377 -458 -484 Administrative expenses -97 -49 -77 -49 -76 -56 -86 -110 Other income 2 1 2 -2 Other expenses -15 EBITDA 110 88 394 189 428 268 198 187 Earnings before interest and tax (EBIT) 43 61 318 164 352 224 114 111 EBIT margin (%) 3.4 8.1 18.4 15.7 20.5 17.7 8.5 7.8 Income from associates -1 -1 19 12 9 8 8 15 Financial income and expenses -22 -6 -14 -7 -8 -9 -16 -24 Profit before tax 20 54 323 169 353 223 106 102 Profit for the period 14 41 252 142 273 173 85 124 Parent Company shareholders’ share of profit 14 41 252 142 273 173 85 124

Balance Sheet Non-current assets 5,800 1,972 5,744 2,073 5,652 5,926 5,664 5,810 Total assets 6,995 2,873 7,282 3,058 7,068 7,235 7,024 6,925 Equity 2,157 1,338 2,440 1,277 2,717 2,025 2,818 2,133 Net interest-bearing debt 2,638 401 2,042 440 1,606 2,604 1,553 2,379 Net working capital -567 -87 -756 -158 -757 -583 -814 -834

Cash Flows From operating activities -207 -19 568 262 390 177 144 233 From investing activities -52 -10 29 -26 48 -2,802 -94 1 Free cash flow -254 -30 594 236 432 151 53 241

Financial Ratios (%) Free cash flow as a percentage of net revenue -20 -4 34 23 25 12 4 17 Cash conversion -1,814 -73 236 166 158 87 61 194 Equity ratio 31 47 34 42 38 28 40 31

Ratios comprised by the “Recommendations and Financial Ratios 2010” issued by the Danish Society of Financial Analysts have been calculated according to the recommendations. Definitions of financial highlights and ratios are provided on page 117.

ANNUAL REPORT 2014 Royal Unibrew 117

Definitions of Financial Highlights and Ratios

Net interest-bearing debt Mortgage debt and debt to credit institutions less cash at bank and in hand, interest- bearing current investments and receivables.

Net working capital Inventories + receivables - current liabilities except for corporation tax receivable/­ payable as well as mortage debt and debt to credit institutions.

Free cash flow Cash flow from operating activities less net investments in property, plant and ­equipment and plus dividends from associates.

Dividend per share Proposed dividend per share.

Earnings per share Parent Company shareholders’ share of profit for the year/average number of shares in circulation.

Cash flow per share Cash flow from operating activities/average number of shares in circulation.

Diluted earnings and cash flow per share Parent Company shareholders’ share of earnings and cash flow from operating activities/ average number of shares in circulation including restricted shares “in-the-money”.

EBITDA Earnings before interest, tax, depreciation, amortisation and impairment losses as well as profit from sale of property, plant and equipment and amortisation of intangible assets.

EBIT Earnings before interest and tax.

Return on invested capital after tax EBIT net of tax as a percentage of average invested capital (equity + minority interests + including goodwill (ROIC) non-current provisions + net interest-bearing debt - fixed asset investments).

Return on invested capital after tax EBIT net of tax as a percentage of average invested capital (equity + minority interests + excluding goodwill (ROIC) non-current provisions + net interest-bearing debt - fixed asset investments - goodwill).

EBIT margin EBIT as a percentage of net revenue.

Free cash flow as a percentage Free cash flow as a percentage of net revenue. of net revenue

Cash conversion Free cash flow as a percentage of net profit for the year.

Net interest-bearing debt/EBITDA The ratio of net interest-bearing debt at year end to EBITDA. before special items

Equity ratio Equity at year end as a percentage of total assets.

Return on equity (ROE) Consolidated profit after tax as a percentage of average equity.

Dividend payout ratio (DPR) Dividend calculated for the full share capital as a percentage of the Parent Company shareholders’ share of net profit for the year. 118 ANNUAL REPORT 2014 Royal Unibrew

Group Structure

Segment Ownership Currency Capital

Parent Company Royal Unibrew A/S, Denmark DKK 110,985,000

WESTERN EUROPE Subsidiaries Aktieselskabet Cerekem International Ltd., Denmark 100% DKK 1,000,000 Albani Sverige AB, Sweden 100% SEK 305,000 Ceres S.p.A., Italy 100% EUR 206,400 The Curious Company A/S, Denmark 100% DKK 550,000

Associates Grønlandskonsortiet I/S, Denmark 50% DKK Hansa Borg Holding AS, Norway 25% NOK 54,600,000 Nuuk Imeq A/S, Nuuk, Greenland 32% DKK 38,000,000

BALTIC SEA Subsidiaries AB Kalnapilio-Tauro Grupe, Lithuania 100% LTL 23,752,553 UAB Vilkmerges Alus, Lithuania 100% LTL 3,570,000 Oy Hartwall Ab 100% EUR 13,240,140 Hartwa-Trade Oy Ab 100% EUR 168,188 Helepark Oy 100% EUR 6,761 Lapin Kulta Oy 100% EUR 16,819 Royal Unibrew Services UAB, Lithuania 100% LTL 150,000 SIA “Cido Grupa”, Latvia 100% LVL 785,074 OÜ Royal Unibrew Eesti, Estonia 100% EUR 2,000,000

MALT BEVERAGES AND EXPORTS Subsidiaries Centre Nordique d’Alimentation EURL, France 100% EUR 131,000 Royal Unibrew Caribbean Ltd., Puerto Rico 100% USD 200,000 Supermalt UK Ltd., the UK 100% GBP 9,700,000 Vitamalt (West Africa) Ltd., England 100% GBP 10,000 The Danish Brewery Group Inc., USA 100% USD 100,000

Aktivitet Production, sales and distribution Sales and distribution Holding company Other ANNUAL REPORT 2014 Royal Unibrew 119 Royal Unibrew A/S Faxe Alle 1 DK-4640 Faxe Tel +45 56 77 15 00 Fax +45 56 71 47 64

CVR No. 41 95 67 12 Financial year: 1 January - 31 December Registered municipality: Faxe

Homepage: www.royalunibrew.com

E-mail: [email protected] MeyerBukdahl production: Design and graphical